Amended Complaint

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SUPREME COURT OF THE STATE OF NEW YORK 

COUNTY OF QUEENS 
  - -- x 

THE COUNCIL OF THE CITY OF NEW YORK, 

PETER F. VALLONE, SPEAKER OF THE 

COUNCIL, and ENOCH H. WILLIAMS, CHAIR OF THE 

COUNCIL HEALTH COMMITTEE, 

Plaintiffs, Index No. 004897-96 

- against - 

RUDOLPH W. GIULIANI, THE MAYOR OF THE CITY AMENDED COMPT.AINT 

OF NEW YORK, NEW YORK CITY HEALTH AND 

HOSPITALS CORPORATION, and NEW YORK CITY 

ECONOMIC DEVELOPMENT CORPORATION, 

; Defendants. 

    - ee ———————— Se tt xX 

Plaintiffs, The Council of the City of New York (the “City Council”), Peter F. 

Vallone, Speaker of the City Council and Enoch H. Williams, Chair of the City Council 

Health Committee, by their attorneys, Tenzer Greenblatt LLP and Richard M. Weinberg, for 

their complaint allege as follows: 

NATURE OF THE CASE 

| This is an action to declare and mandate that the defendants Rudolph W. Giuliani, 

Mayor of the City of New York (the “Mayor™), the New York City Health and 

Hospitals Corporation (the “HHC”), and the New York City Economic Development 

Corporation (*EDC”) must 

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a. submit to the City Council for approval any and all proposed transfers, sales, 

and/or subleases by the HHC to private lessees of the ITIC hospitals including 

Coney Island Hospital, Queens Hospital Center and Elmhurst Hospital 

pursuant to the Health and Hospitals Corporation Act, Unconsolidated Laws § 

7381, et seq. (the “HHC Act”); and 

b. comply with the Uniform Land Tse Review Procedures (“ULURP™) of Section 

197-¢ and 197-d of (he New York City Charter (the “City Charter”), which 

require City Planning Commission and City Council approval of any transfers 

or dispositions of HHC hospitals. 

2. Such a declaration is necessary because the Mayor and the other defendants have 

acted and are continuing to act in furtherance of their wrongful contention that 

a. ouly the Mayor's approval is required for the proposed subleases under the 

HHC Act and not the City Council's; and 

b. the transfer or disposition into private hands of these City-owned properties 1S 

not subject to ULURP. 

3. The Mayor's position described in the previous paragraph contravenes and subverts 

the intention of the HHC Act, which authorized the disposition of HHC facilities 

subject to the Board of Estimates Jucal legislative power, a power which now, 

re to the City Charter currently in effect, vests wholly in the City Council. 

4. The Mayor's calculated and unlawful effort to preclude City Council review of any 

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plan to dispose of HHC hospitals and property represents not only a radical departure 

from the system of checks and balances provided for in both the HHC Act and the 

City Charter, but also an attempt to curtail public debate about a plan which would 

impose a dramatic change in the health care policy of the City having its greatest 

impact upon the indigent. 

THE PARTIES 

5, The City Council is (he independent legislative branch of the government of the City 

of New York (the “City”). City Charter § 21. Plaintiff Peter F. Vallone is Speaker 

of the City Council and plaintiff Enoch H. Williams is Chair of the City Council 

Health Committee. 

6. The Mayor is the chief executive officer of the City. City Charter, § 3. 

7. The HIIC is a public benefit corporation which was created in 1970 under the HHC 

Act for the purpose of assuming responsibility for the operation of the municipal 

hospital system of the City. Unconsolidated Laws § 7381, er seq, 

8. The EDC was established pursuant to State pot-for-profit corporation law and isa 

local development corporation that acts on behalf of the City, pursuant to a contract 

funded by the City budget, with respect to certain commercial real estate, economic 

development marters arxl privatization projects. The majority of the EDC Board is 

appointed by the Mayor, and the President of EDC Board of Directors serves at the 

pleasure of the Mayor. 

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STATEMENT OF FACTS 

Creation of the HHC 

9. Prior to July 1, 1970, the City constructed, maintained and operated hospital facilities 

in all five boroughs providing general chronic, ambulatory aod skilled nursing care to 

residents of the City and particularly those who could not otherwise afford hospital 

services. 

On July 1, 1970, New York State enacted the HHC Act, Unconsolidated Laws § 

7381, et seq, creating the HHC and authorizing the City to transfer the municipal 

hospital facilities to HHC for the purpose of maintaining and operating them. 

The statutory mission of HHC is to provide comprehensive physical, mental health, 

and substance abuse to the ill and infirm of the City, “particularly to those who can 

least afford such services,” U.L. § 7382, consistent with the State’s mandate 

contained in Article XVII of the New York State Constitution which provides that 

§3 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 . . . as the legislature shall from time 

to time determine. 

The care and treatment of persons suffering from mental 

disorder or defect and the protection of the mental health of the 

inhabitants of the state may be provided by state and local 

authorities and in such manner as the legislature may from time 

to time determine. 

Upon information and belief, the HHC operates the largest municipal hospital system 

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in the United States and, 3s a governmental health provider, is second in size to the 

U.S. Department of Veteran Affairs. 

12. The HHC was created at the request of the City in part to permit independent 

financing of municipal hospital construction and improvements and to facilitate 

professional management of the hospital system. At the same time, the City’s 

intention was to insure its dominion and control over the HHC. Since its creation, 

the City's dominion and control of HHC has been achieved by the following 

provisions of the Act: 

a. The HHC’s funding has been derived from inclusion in the City budget, 

commencing with its submission of its program budget to the City in time for 

inclusion in the Mayor's executive budget, HHC Act, U.L. § 7386(1)(a), and 

culminating with its inclusion in the City budget which the City Council bas 

the sole authority to adopt. | 

b. The City has the right to acquire any health facility held by the Corporation. 

Id., § 7386(2)(D). 

c. The HHC must exercise its powers in accordance with policies and plans 

determined by the City. 1d. § 7386(7). 

d. Employee grievances are conducted in accordance with the New York City 

Administrative Code. Id., § 7390(5)-(8). 

2. The HHC is dependent upon agents, employees and facilities of the City, 

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whose availability is at the pleasure of the Mayor. 1d., § 7385(19). 

‘I'he HHC, therefore, unlike other public bencfit corporations such as the 

Metropolitan Transportation Authority or the Urban Development Corporation, 

is and was intended to be an instrumentality of the City. 

fn addition, the HHC Act gives the Mayor personal appointive domination over the 

Board of Directors of HHC, which consists of 16 persons. The Chair is designated 

by (ie Mayor. Four other members who serve ex officio are heads of City agencies 

also appointed by the Mayor. Five additional members arc appointed by the Mayor. 

Five members are designated by the City Council. The remaining director is the 

Chief Executive Officer of the Corporation chosen by the other 15 directors. HHC 

Act, U.L. § 7384. 

As a check on the Mayor's appointive power over the HHC Board of Directors 

and his power 10 propose changes in ownership of HHC facilities, the HHC 

Act further provides that no health facility or other real property acquired from 

the City or constructed by the Corporation may be sold or leased or otherwise 

transferred without the consent of the Board of Estimate of the City. Id., §§ 

7385(6); 7387(4). 

In 1970, at the time of the passage of the HHC Act, the Board of Fstimate 

consisted of three members who were elected Citywide (the Mayor, the 

President of the City Council and the Comptroller), plus the elected presidents 

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of each of the City’s five boroughs. It had both executive and legislative 

tunctions. The Mayor, President of the City Council and the Comptroller 

were each entitled to cast four votes on the Board of Estimate; each of the 

borough presidents had two votes for a total of 22 votes. Therefore, although 

the Mayor had four votes, any combination of 12 votes could, after a public 

hearing, defeat any proposal the Mayor put forth before the Board of Estimate. 

City Charter, § 62(a) (1968). 

16. In response to the determination by the United States Supreme Court in Morris 

v. Board of Estimate, 647 F. Supp. 1463 (E.D.N.Y. 1986), aff d, 831 F.2d 

384 (2d Cir. 1987), aff'd, 489 U.S. 688 (1989) that the Board of Estimate’s 

voting scheme was unconstitutional, the 1989 Charter Revision process 

abolished the Board of Estimate and restructured the City’s government. 

17. The current City Charter, which became effective on January 1, 1990, vests 

exclusive local legislative power in the City Council, City Charter, § 21, and 

oversight authority in it and its committees, City Charter, § 29. 

18. It is clear that the City Council has succeeded to the role of the Board of 

Estimate under the HHC Act, because the Act contemplates that there will be a 

local legislative restraint on certain HHC-related decisions proposed hy the 

Mayor. The Board of Estimate’s approval power under the HHC Act, 

accordingly, devolved to the only local legislative body of the City, the City 

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Council. See City Charter, § 1152(c). 

HHC’s Role Since Its Creation 

19. The State Constitutional mandate 10 provide health care for the indigent is 

reflected in Section 1 of the HEC Act and, moreover, in the operating lease 

between the City and the HHC. 

On or about July 10, 1970, the City leased all of its hospital facilities t0 HHC, 

for an annual rent of § 1. The lease exteils for as long as the HHC has a 

corporate existence. At all times since July 10, 1970, the HHC has operated 

the hospitals under the lease. There are eleven such HHC hospitals City-wide, 

hut as of the filing of this complaint, there are three hospitals, Coney Island 

Hospital, Queens Hospital Center and Elmhurst Hospital Center (the “Target 

Hospitals”), which the Mayor proposes to dispose of in this first round of 

privatization. 

The Target Hospitals form a significant part of the HHC system. Coney 

Island Hospital is the largest medical facility in South Brooklyn, serving a 

population of 7 50,000. Queens Hospital Center and Elmhurst Hospital Center 

are the only acute care municipal hospitals in the Rarough of Queens. 

Moreover, the three Target Hospitals are the primary sources of health care 

for low income and indigent residents of the areas which they serve, including 

Medicaid and Medicare recipients and indigent patients with special needs such  



    

23. 

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as AIDs, TB, mental illness and homelessness. The Target Hospitals operate 

extensive ambulatory programs, outpaticnt departments, emergency rooms, 

alcoholism and drug treatment programs, methadone maintenance clinics, 

neighborhood psychiatric facilities and alternative care. 

The Target Hospitals also treat and admit many uninsured and underinsured 

patients. Hospitals outside the HHC system are only required by State law to 

treat uninsured patients when there is an emergency need for immediate 

hospitalization. Public Health Law § 28035-D. 

Medical services provided to the City’s uniformed services (the Police and 

Fire Departments) are provided by HHC hospitals including the Target 

Hospitals. 

The Mayor's Privatization Plan 

24. 

25. 

26. 

In 1994, the Mayor publicly announced his intention to privatize the leased 

hospitals by transferring them from HHC to private voluntary (i.¢., non-HHC 

hospitals) hospitals in order to relieve the City of some or all of the expense 

necessary for their operation. 

The HHC hospitals targeted for the first stage of this massive privatization 

program (the Mayor's « Asset Disposition Program”) are the aforementioned 

Copey Island Hospital, Queens Hospital Center and Eluimrst Hospital Center. 

In this first wave of privatization of City hospitals, the Mayor initially 

s 

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proposed (Le sale of the Target Hospitals. But, apparently, because of the 

perpetual lease between the City and HHC, he unilaterally restructured the 

form of the ransactions $0 as to provide for long-term (YY year) subleases 

from the HHC to the selected sublessees. The transactions are, however, in 

purpose and effect sales, and are referred to as such in the City’s privatization . 

Offering Memoranda which also refer to the potential lessees as “purchasers. : 

The Mayor has made clear (hat he views the HHC as a vehicle which he can 

control, and that he alone has the authority to transform the health care system 

of the City without the scrutiny, much less the approval, of the HHC Board, 

the City Council and other public officials. | 

The Mayor has exercised his dominion and control over the HHC and the 

Asset Disposition Program from its very inception. The Mayor announced the 

proposed transfers of the ‘Target Hospitals without consulting with, much less. 

obtaining approval from the HHC Board, ia violation of U.L. § 7384 which 

vests the powers of the HHC in the Board. 

The Mayor has imposed a veil of secrecy on the privatization process such that 

essential, material information has heen routinely withheld from HHC’s Board 

of Directors and others legally entitled to such information. 

Indeed, management of the disposition of the ‘larget Hospitals has been 

withheld from HHC and put instead into the hands of the EDC, an agency 

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controlled by the Mayor. The HHC Board was not consulted nor did it 

approve of such management. 

31. In August 1994, without consulting with or obtaining the approval of the HHC 

Board, the EDC directly retained J.P. Morgan Securities, Inc. (“J.P. 

Morgan”) to act as the financial advisor with respect to the plan to privatize 

thc Target Hospitals. 

32. In 1995, J.P. Morgan rendered 2 report to the Mayor concluding that the 

current milien in health care provided an excellent opportunity for the City to 

privatize the Target Hospitals, The HHC Board did not review or authorize 

this report or its recommendations and did not receive it until after it was 

made public. 

33. On February 23,1995, in a press release, withont consulting with or obtaining 

the approval of the HHC Board, the Mayor announced that the City would 

move forward in its effort to privatize the Target Hospitals. In this 

connection, and without consulting with or obtaining the approval of the HHC 

Board. the Mayor created and alone appointed an « Advisory Panel” to study 

the sale of the Target Hospitals. 

34. The HHC Board of Directors has never approved the Mayor's decision to 

privatize the Target Hospitals. To the contrary, in April 1995, five members 

of the HHC Board wrote to the Mayor complaining that the HHC Board had 

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not been consulted with respect to the proposal and, upon information and 

belief, they received no response tw their letter. 

Thereafter, on August 1, 1995, without consulting with or obtaining the 

approval of the BHC Board, EDC, acting on behalf of the Mayor, entered into 

an agreement with J.P. Morgan as financial advisor for the purpose of 

implementing the Mayor's plan to privatize the Target Hospitals. The 1.P. 

Morgan agreement provided no role for the HHC Board, reserving, instead, 

for EDC the right to accept or reject, in its sole discretion, any proposed 

transaction. 

On or about October 26, 1995, the EDC issued two Offering Memoranda 

prepared by I.P. Morgan for the privatization of the Target Hospitals. The 

Offering Memoranda were never submitted to the HHC Board for its advice, 

comment or approval. | 

EDC retained counsel to handle the legal aspects of the transfer of the Target 

Hospitals, The HHC Board was never consulted about nor did it approve of 

such retention of counsel. 

Following the issuance of the Offering Memoranda, the Mayor and EDC have 

ignored the efforts of the City Council to exercise its State-and City Charter- 

given authority regarding the disposition of the Targel Hospitals. On October 

30, 1995, City Council Speaker Peter F. Vallone wrote to the Mayor. In that  



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letter, Mr. Vallone stated, in part: 

I request (Liat, notwithstanding statements by your office to the contrary, you 

recognize the vital legal role the City Council must play in any effort to lease 

the aforementioned hospitals. We can and should work together, in the spirit 

of cooperation, to develop a plan that provides quality health care in a cost- 

effective manner to all of the citizens of our City. 

The Council, pursuant to State Law and the City Charter, has an obligation to 

play a significant role in any effort by (Le City to sell, transfer or lease the 

[HHC facilities]. Specifically, pursuant to Unconsolidated Laws Sections 7385 

and 7387(4), the City Council, as the successor in interest to the Board of 

[stimate in this connection, has an obligation to approve of any such sale, 

transfer, lease or sub-lease. Moreover, under Section 197-¢ of the New York 

City Charter, the City Council wust approve of any change or contract 

respecting the use, development OF improvement of real property of the City. 

The real property underlying the three aforementioned hospitals is such City 

property. 

de we 

I respectfully urge you to recognize the City Council's legal role in this 

process, so that it will not become necessary to transform this watter into a 

legal battleground where the City Council or concerned citizens must seek 

court intervention to vindicate their rights. 1 emphasize that the preferable 

course is Ww work together to develop a cost-efficient sotion that safeguards 

the health care of the citizens of the City of New York. 

I look forward to your reply. 

39. The Mayor pever answered Speaker Vallone’s letier of October 30, 1995. 

40. The City Council's concerns, expressed by Speaker Vallone, arc not the only 

ones that have been ignored by the Mayor. City Comptroller Alan G. Hevesi 

has written two letters, in September and November 1995, both of which, 

upon information and belief, have gone unanswered. The subject of 

Comptroller Hevesi’s letters was, like that of Speaker Vallone's, the fact that 

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the City has done little or no analysis with regard to maintaining health care 

for the indigent. 

Indeed, conspicuously absent from all J.P. Morgan reports and from the 

Offering Memoranda, and still unaddressed by the Mayor's Advisory Panel, is 

any meaningful plan, consistent with Article XVII of the New York State 

Constitution, regarding the provision of and funding for medical care and 

facilities for the indigent after a sale of the Target Hospitals. Since the 

disposition of the Target Hospitals is only the first phase in a much larger 

privatization plan involving many more UHC facilities, there is a critical need 

for a concrete program to address, at the outset, continuation of 

comprehensive health care for the indigent, how medical services will be 

provided to the City’s uniformed services, and how funding will be handled 

for all of the foregoing needs. The Cily Council's role in developing such a 

plan is not only vital from a policy standpoint, but legally certain and 

necessary. 

On information and belief, the Mayor is on the verge of consummating deals 

for the disposition of the Target Hospitals. The Mayor has continued to keep 

the hospital privatization proccss secret. He has refused to inform the City 

Council, the Comptroller and even the HEC Board itself of the identities of 

the parties whose bids for the Target Hospitals were received in February.  



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be 

ols 

—. 

Deputy Mayor Peter Powers, asked recently why no details of privatization or 

of We bids received by the City were being given to the City Council, told 

Newsday in February 1996: “They don’t have a right Lo have a say in this.” 

FIRST CAUSE OF ACTION 

43. Plaintiffs repeat and reallege the allegations of paragraphs 1 through 42 as 

though fully set forth herein. 

44. In the HHC Act, the State Legislature imposed the requirement that HHC 

could not sell, transfer or lease any of its facilities to any other agency, entry 

or group without the approval and consent of the City’s Board of Estimate. 

U.L. § 7385(6) and 7387(4). In so anliorizing the Board of Estimate, the 

State Legislature imposed a local legislative check to restrain the Mayor from 

making certain critical decisions respecting health care services in the City 

without the input of a City legislative force. 

45. The devolution of that power to the City Council is certain since the State's 

unchanged statutory scheme contemplates that the Mayor could initiate 

proposals and control the HHC’s decision-making through his appointive 

powers, but that a local legislative body would scrutinize and ultimately 

approve or disapprove certain important actions by thc HHC. 

46. Despite the intent of the HHC Act to require local legislative approval, the 

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Mayor and his counsel contend that under the new City Charter, the power to 

dispose of the property of the City has devolved solely upon the Mayor. In 

the Mayor's view, therefore, he alone could propose the sale, transfer or lease 

of any HHC facility and thereafter, he alone would bave the power to approve 

the terms of such disposition on behalf of the City. In the Mayor's view, he 

may act unilaterally and unchecked by any local legislative body in 

contravention of the HHC Act's legislative intent. 

The Mayor's position described above subverts the intent of the HHC Act that 

any disposition of the HHC facilities be subject to local legislative approval, a 

role which the new City Charter vests wholly in the City Council. The 

Mayor's unilateral abrogation of power is designed to shut the City Council 

and even the HHC Board out of the privatization process and to prevent them 

from exercising their rightful rolcs under the HHC Act and the City Charter. 

Such action by the Mayor is especially egregious given that privatization of the 

HHC facilities will bring about an unprecedented transformation in the 

delivery of health care to the indigent and to the City, particularly to the City’s 

uniformed services. 

SECOND_CAUSE OF ACT 

Plaintiffs repeat and reallege the allegations of paragraphs 1 through 47 as 

though fully set forth herein. 

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49. 

50. 

51. 

52. 

3s. 

07/22/96 MON 18:50 raf 885 5002 TENZER GREENBLATT L.L.P 3 @018 

The new City Charter, in addition to abolishing the Board of Estimate, 

instituted ULURP as a means to insuring community, borough and City 

Council participation in any sale or lease of City property. In pertinent part, 

ULURP is required whenever there is a sale, lease . . . exchange or other 

disposition of the real property of the city. . . .“ City Charter § 197-d(e). 

The Mayor contends that the privatization of the Target Hospitals does not 

require ULURP because the transactions consist of subleases by the HHC to 

private institutions. 

This contention ignores the fact that the HHC is an instrumentality of and 

under the dominion and control of the City and that even if it were not under 

the City’s dominion and control, the subleases constitute, in form and 

substance, a disposition of real property of the City which requires the 

application of ULURP. 

THIRD CAUSE OF ACTION 

Plaintiff repeats and realleges the allegations of paragraphs 1 through 51 as though 

fully set forth herein. 

Pursuant to General City Law, §23 and the City Charter § 384 real property of the 

City may not be leased except for the highest marketable rental at public auction or 

by sealed bids, in the absence of a local law otherwise so providing. 

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The proposed subleases of the Target Hospital by negotiated subleases made without 

the approval of the city council is in violation of said provisions. 

WHEREFORE, plaintiffs demand judgment 

A. declaring that the privatization of the Target Hospitals by means of a 

sublease (or other device) to private institutions requires the approval of 

the City Council; 

declaring that any sale, transfer or lease of any other HHC facilities 

likewise be subjected to City Council approval; 

declaring that such disposition also requires the application of New 

York City's Uniform Land Use Review Procedures; | 

permanently enjoining defendants from selling, leasing or otherwise 

disposing of any HHC hospital or real property prior to submitting and 

obtaining the necessary approvals of the City Council; 

mandating that the Mayor and EDC, as an agency funded by the 

City and expending City funds in connection with its conduct in 

relation to the HHC, provide the City Council with all requisite 

information pursuant to Section 29 of the City Charter; and 

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F. granting plaintiffs such other and further relief as the Court may deem 

just and proper. 

Dated: New York, New York 

July 18, 1996 

-19- 

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TENZER GREENBLATT LLP 
Attorneys for Plaintiffs 
The Chrysler Building 
405 Lexington Avenue 

New York, New York 10174 

(212) 573-4300 

-and- 

RICHARD M. WEINBERG, ESQ. 

General Counsel 

The Council of the City of New York 

Gail R. Zweig 
Of Counsel 

75 Park Place 

5th Floor 

New York, New York 10007 

(212) 788-7000 

@o020