Royal Crown Day Care LLC et al v. The Board of Health of the City of New York et al
MEMORANDUM & ORDER granting in part and denying in part 39 Motion for Summary Judgment. Defendants' motion is denied as to Plaintiffs' substantive due process claim but granted as to the Individual Plaintiffs. The parties are directed to file a Joint Pre-Trial Order within thirty (30) days. Ordered by Judge Margo K. Brodie on 7/20/2012. (Lee, Margaret)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
ROYAL CROWN DAY CARE LLC, BORIS REY,
IRINA GAFINA and IRINA PRITSKER,
MEMORANDUM & ORDER
THE DEPARTMENT OF HEALTH AND MENTAL
HYGIENE OF THE CITY OF NEW YORK,
FRANK CRESCIULLO, individually and in his
official capacity, JAMES MORRISS, individually
and in his official capacity, and AURORA
VILLAREAL, individually and in her official capacity,
MARGO K. BRODIE, United States District Judge:
Plaintiffs Royal Crown Day Care LLC (“Royal Crown”), Boris Rey, Irina Gafina and
Irina Pritsker bring the above-captioned action pursuant to 42 U.S.C. § 1983 against Defendants
Department of Health and Mental Hygiene (the “Department of Health”), Frank Cresciullo,
James Morriss and Aurora Villareal. Plaintiffs allege that Defendants suspended their day care
permit in retaliation for a letter that Royal Crown sent to a state senator claiming, among other
things, that Royal Crown was being harassed and that the Department of Health is corrupt.
Defendants moved for summary judgment on all of Plaintiffs’ claims, and Plaintiffs cross-moved
for summary judgment on their procedural due process claim only. The Court heard argument
on the parties’ motions on July 13, 2012. At the argument, the Court ruled on the majority of the
parties’ motions but reserved decision as to Defendants’ motion for summary judgment on (1)
Plaintiffs’ substantive due process claim and (2) claims by individual plaintiffs Boris Rey, Irina
Gafina and Irina Pritsker (the “Individual Plaintiffs”).1 For the reasons set forth below,
Defendants’ motion is denied as to Plaintiffs’ substantive due process claim but granted as to the
On August 20, 2009, Royal Crown received a permit from the Department of Health for a
child care service. (Def. 56.1 ¶ 2.) According to Defendants, the Department of Health received
complaints about Royal Crown on September 30, 2009, October 9, 2009, December 3, 2009,
December 11, 2009, February 22, 2010 and April 29, 2010. (Def. 56.1 ¶¶ 13–18.) The
Department of Health investigated each of the complaints, but, for the most part, the complaints
were determined to be unfounded or were remedied by the time the inspector left Royal Crown.
Id. On April 13, 2010, Royal Crown’s permit was amended to allow it to accommodate a total of
172 children. Id. at ¶ 7.
On April 30, 2010, the Department of Health received another complaint, and it sent four
staff members to conduct an inspection. Id. at ¶ 19. According to Defendants, the inspectors
identified a number of violations, including insufficient staffing and staff without criminal and
child abuse registry clearances. Id. Plaintiffs claim that during the April 30 inspection, the
inspectors arrived unannounced, disrupted the children’s activities, yelled at the teachers and
“otherwise conduct[ed] themselves in a rude, oppressive and unprofessional manner.” (Compl.
¶ 37.) As a result of this inspection, Royal Crown sent a letter of complaint to New York State
Senator Martin Golden. Id. at ¶ 38. In the letter, Royal Crown states, among other things, that
At the July 13, 2012 argument, the Court granted Defendants’ motion for summary
judgment on Plaintiffs’ procedural due process claim, unconstitutional taking claim, state law
claims and as to Defendant Board of Health; denied Defendants’ motions for summary judgment
on Plaintiffs’ First Amendment retaliation claim and on qualified immunity grounds; and denied
Plaintiffs’ motion for summary judgment on their procedural due process claim.
the owner of a rival day care has been calling the Department of Health with complaints; that
during the recent inspection the Department of Health inspectors barged into the day care and
insulted children and parents; and that the Department of Health is corrupt and trying to shut
Royal Crown down. (Def. Summ. J. Ex. 16.) Senator Golden’s office forwarded the letter to the
Department of Health, asking them to respond to the allegations. Id.
In response to the letter, Defendant Cresciullo directed Defendant Morriss to assemble a
team to conduct a thorough assessment of Royal Crown. (Def. 56.1 ¶ 24.) Defendant Morriss
personally selected four inspectors for the investigation. Id. at ¶ 25. The four inspectors
conducted a two-day inspection of Royal Crown on June 11 and June 14, 2010. Id. at ¶ 27. The
inspectors then drafted a report listing a number of violations, including, among other things,
employees without criminal and child abuse clearances, staff listed in the database that did not
work at the day care center and classrooms that were overcapacity and understaffed. Id. at ¶¶
29–32. Defendants claim that because inspectors identified 14 staff members without the proper
clearances, Royal Crown could not remain open and the suspension of their permit was
automatic. Id. at ¶ 34.
On June 15, 2010, Royal Crown’s day care permit was suspended and it was ordered to
cease operations. Id. at ¶ 35. The suspension order included the following provision: “To object
to this Order or to request an opportunity to show cause why you should not remain closed, you
must contact James Morriss, Director of Field Operations and Regulatory Enforcement at (212)
676-2464 within three days of receipt of this Order. If you have any questions please contact
Mr. Morriss.” Id. at ¶ 37. On June 18, 2010, the Department of Health served Royal Crown’s
counsel with a Petition and Notice of Hearing before the New York City Office of
Administrative Trials and Hearings (“OATH”) to permanently revoke its permit. Id. at ¶ 43.
After discovery was conducted, the OATH proceeding commenced on August 17 and was held
August 17–19 and September 17. Id. at ¶ 48. The hearing was temporarily suspended so the
parties could negotiate a settlement, but they could not reach an agreement and the hearings
continued October 27–29 and November 12. Id. at ¶¶ 49–50. On November 12, 2010,
Department of Health attorneys moved to terminate the OATH proceeding because Royal Crown
had given up its lease and therefore the permit was automatically void. Id. at ¶ 52. Royal
Crown’s attorney objected, but the Administrative Law Judge (“ALJ”) granted the Department
of Health’s motion to withdraw its charges with prejudice. Id. at ¶ 53. Royal Crown did not
appeal this decision or proceed with its pending Article 78 proceeding.
Royal Crown alleges that on several occasions Defendant Aurora Villareal, a Brooklyn
Borough manager, told Royal Crown that if it wanted to stay in business it had to pay money.
(Compl. ¶ 70.) Defendants do not dispute that three Department of Health staff members, who
had some contact with Royal Crown, were arrested in connection with a bribery scandal that
involved a group of approximately 30 Brooklyn and Staten Island day care centers. (Def. 56.1 ¶
54.) Defendant Villareal was arrested on August 10, 2010 and indicted for conspiracy to commit
mail and “honest services” fraud. Id. at ¶ 55. Emile Nekhala and Dionne Rivers-Ettu, both of
whom conducted inspections of Royal Crown, were also indicted. Id. at ¶ 56.
a. Standard of Review
Summary judgment is proper only when, construing the evidence in the light most
favorable to the non-movant, “there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Doninger v. Niehoff,
642 F.3d 334, 344 (2d Cir. 2011). The role of the court is not “to weigh the evidence and
determine the truth of the matter but to determine whether there is a genuine issue for trial.”
Cioffi v. Averill Park Cent. Sch. Dist. Bd. of Educ., 444 F.3d 158, 162 (2d Cir. 2006) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). A genuine issue of fact exists when
there is sufficient “evidence on which the jury could reasonably find for the plaintiff.”
Anderson, 477 U.S. at 252.
b. Substantive Due Process
In order to prevail on a substantive due process claim, Plaintiffs must show (1) that they
had a valid property interest in the day care permit, and (2) that Defendants infringed that
property interest in an arbitrary or irrational manner. Cine SK8, Inc. v. Town of Henrietta, 507
F.3d 778, 784 (2d Cir. 2007) (citing Harlen Assoc. v. Inc. Vill. of Mineola, 273 F.3d 494, 503 (2d
Cir. 2001)). Substantive due process “does not forbid governmental actions that might fairly be
deemed arbitrary or capricious and for that reason correctable in a state court lawsuit. . . . [Its]
standards are violated only by conduct that is so outrageously arbitrary as to constitute a gross
abuse of governmental authority.” Harlen Assoc., 273 F.3d at 503; see also Natale v. Town of
Ridgefield, 170 F.3d 258, 263 (2d Cir. 1999) (“For state action to be taken in violation of the
requirements of substantive due process, the denial must have occurred under circumstances
warranting the labels ‘arbitrary’ and ‘outrageous.’”). A defendant’s decision to deprive a
plaintiff of his or her property interest because of an illegal or unconstitutional motive is
irrational and gives rise to a substantive due process claim. Natale, 170 F.3d at 263; see also
Cine SK8, 507 F.3d at 788 (“[P]laintiffs have sufficiently raised a genuine issue of material fact
as to whether the Town’s amendment of the special use permit was tainted by racial animus and
hence was irrational.”).
As the Court held at the July 13 argument, Plaintiffs have provided sufficient evidence
from which a jury could infer that Defendants’ suspension of their day care permit was
motivated by retaliatory animus. Defendants do not dispute that, upon receiving the letter Royal
Crown sent to Senator Golden, they initiated an investigation of Royal Crown, which was to
include “a re-examination of past complaints that were found to be unsubstantiated.” (Pl. Opp’n
Summ. J. Ex. FF at 4; Pl. 56.1 ¶ 27; Def. Reply 56.1 ¶ 12.) Defendants did not take any steps to
investigate Royal Crown’s claim that it was being harassed or that the Department of Health was
corrupt and trying to shut Royal Crown down. (Pl. Opp’n Summ. J. Ex E at 126–27.)
Defendants did not consult with Royal Fisher, the inspector that had conducted the prior
investigations into the complaints; instead, Defendant Morriss personally selected four inspectors
to conduct a two-day investigation. (Pl. Opp’n Summ. J. Ex. E at 70–71.) In advance of that
inspection, Defendant Morriss provided the inspectors with a detailed five-page memorandum,
which informed the inspectors that Plaintiffs had received an above-average number of
complaints and identified specific issues the inspectors were to look for in determining whether
the prior complaints should be substantiated. (Pl. Opp’n Summ J. Ex. FF at 1–2.)
Defendants completed their inspection of Royal Crown on June 14, 2010 and Royal
Crown’s permit was suspended the next day—just six days after Defendants received Royal
Crown’s letter to Senator Golden. (Def. 56.1 ¶¶ 27, 34; Pl. Opp’n Summ. J. Ex. KK.) Prior to
Royal Crown’s letter, Defendants had conducted a number of inspections of the day care center
and never taken any action to suspend or revoke their permit. In fact, Royal Crown’s permit was
amended on April 13, 2010 to allow it to accommodate a total of 172 children. (Def. 56.1 ¶ 7.)
Defendants claim that because of the number of staff members without the proper clearances, the
day care center was in violation of Health Code § 47.19 and suspension was automatic under
Health Code § 47.77. (Def. 56.1 ¶ 34.) Health Code § 47.77 states that “the Commissioner may
order such child care service to close and to discontinue operations, suspending its permit,
without further proceedings” but not that closure or the suspension of the permit is mandated.
N.Y. Health Code § 47.77 (emphasis added). Defendants have failed to provide any evidence or
cite any provision of the Health Code that supports their claim that the suspension of Royal
Crown’s permit was automatic as a result of Royal Crown’s alleged violation of § 47.19. (Def.
Summ. J. Mem. 17 (“Health Code § 47.77(a) empowers [the Department of Health] to suspend
the permit to operate a child care service center in cases where the conditions or manner of its
operation poses an imminent health hazard to the children under its care.”)) (emphasis added).
In fact, Royal Crown was cited for a number of violations, including “insufficient staffing” and
“staff without criminal and child abuse clearances” on April 30, 2010, but the Department of
Health did not even “consider closing the program or suspending the license.” (Def. 56.1 ¶ 19;
Pl. Opp’n Summ. J. Ex. BB.)
Based on the above facts, a jury could reasonably find that Defendants’ decision to
suspend Royal Crown’s permit was motivated by retaliatory animus and was therefore irrational.
Cine SK8, 507 F.3d at 788; see also Cathedral Church of the Intercessor v. Inc. Vill. of
Malverne, No. 02 Civ. 2989, 2006 WL 572855, at *6 (E.D.N.Y. Mar. 6, 2006) (“From the SAC’s
more detailed allegations that Village officials, through various tactics, have stalled and delayed
the Church expansion and to this day have refused to issue a certificate of occupancy, the Court
concludes that such allegations are consistent with an improper motive on the part of Defendants.
Plaintiffs’ allegations of the disparate treatment of the Church compared to other churches and
the synagogue in the Village support a reasonable inference that Defendants’ actions rise to the
level of ‘shocking, abusive, capricious, or arbitrary’ behavior so as to make out a constitutional
violation.”). Defendants’ motion for summary judgment as to Plaintiffs’ substantive due process
claim is denied.
c. Individual Plaintiffs
Defendants argue that the Individual Plaintiffs—Rey, Gafina and Pritsker—do not have
standing and must be dismissed. (Def. Summ. J. Mem. 21.) A plaintiff does not have individual
standing where he or she alleges injuries that are indirectly caused by the harm to the
corporation. Jones v. Niagara Frontier Transp. Auth., 836 F.2d 731, 736 (2d Cir. 1987) (“Even
though Jones may have felt personally aggrieved by defendants’ failure to award contracts to the
Corporation, and even though he may have faced the risk of financial loss as a result, the district
court correctly dismissed Jones’ individual claims for lack of standing.”); see also Caravella v.
City of New York, 79 Fed. App’x 452, 453 (2d Cir. 2003) (“Plaintiff has no individual standing to
bring a civil rights action under 42 U.S.C. § 1983. The injuries to plaintiff as alleged were
indirectly caused by harm to DVS and therefore are not ‘distinct’ from those of the corporation.”
(citing Potthoff v. Morin, 245 F.3d 710, 717 (8th Cir. 2001)); Chabad Lubavitch v. Borough of
Litchfield, Conn., 796 F. Supp. 2d 333, 339 (D. Conn. 2011) (“Federal courts have . . . not found
individual standing for claims under Section 1983 that are indirectly caused by harm to [a
corporation] and therefore are not ‘distinct’ from those of the corporation.”) (internal citations
omitted). “Asserting personal economic injury resulting from a wrong to a corporation is not
sufficient.” Robinson v. Davis, No. 07 Civ. 265, 2010 WL 4062863, at *2 (D. Vt. Oct. 15,
Plaintiffs contend that Rey and Gafina have independent claims because they are
employees that lost their jobs as a result of Defendants’ actions.2 (Pl. Opp’n Summ. J. 21.)
However, such a claim is derivative of Royal Crown’s damages claim and their status as
employees. Robinson, 2010 WL 4062863, at *2 (“The damage claim for reduced personal
earnings is not cognizable as it is derivative of [the corporation’s] damage claims and Robinson’s
status as an employee.”). Accordingly, the Individual Plaintiffs do not have standing and their
claims are dismissed. See Potthoff v. Morin, 245 F.3d 710, 717 (8th Cir. 2001) (“Potthoff’s §
1983 claim can survive only if he has alleged that he personally has suffered a direct,
For the reasons set forth above, Defendants’ motion is denied as to Plaintiffs’ substantive
due process claim but granted as to the Individual Plaintiffs. The parties are directed to file a
Joint Pre-Trial Order within thirty (30) days.
MARGO K. BRODIE
United States District Judge
Dated: July 20, 2012
Brooklyn, New York
Plaintiffs’ counsel conceded during oral argument that Pritsker, a member of Royal
Crown, does not have a claim independent of the corporation.
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