Quinn Emanuel Secures Significant Settlement Victory in a Summary Proceeding Against the New York Attorney General

In June 2023, the New York Attorney General initiated a summary proceeding pursuant to New York Executive Law § 63(12) against Centers Health Care, four of its affiliated nursing homes, and their owners and operators.  Centers Health Care hired Quinn Emanuel to defend its affiliated nursing homes against the AG’s 300+ page petition, which was accompanied by nearly 20,000 pages of supporting documents.  The petition asserted eleven causes of action supported by allegations of a wide-ranging scheme of fraud the AG asserted was designed to extract “up front” profits and was marked by financial mismanagement and understaffing, leading to resident neglect at the nursing homes.  Following an early preliminary injunction hearing, Quinn Emanuel persuaded Justice Melissa Crane of the New York Supreme Court, Commercial Division, to schedule the case in three stages: (1) motion to dismiss the petition, (2) motion for leave to conduct discovery, and (3) answering the petition on the merits—a significant and rare strategic win.

In November 2023, Quinn Emanuel moved to dismiss the majority of the AG’s petition on several grounds.  With respect to certain individual respondents, we argued that the AG resorted to group pleading claims against 27 individual respondents, but failed to describe in what conduct those individuals had engaged to warrant their inclusion in the lawsuit.  The motion also argued that several of the claims were time-barred and otherwise addressed the infirmities in each of the AG’s claims individually, principally arguing that (1) the AG’s conversion-based claims rested on a fundamental misunderstanding of Medicaid reimbursements—i.e., they cannot be converted absent a requirement when paid that they be used to confer a future benefit claims of conversion—and the AG had failed to trace the funds to the government; (2) the fraud-based claims failed to include required particularized allegations; (3) the AG’s claims asserting violations of various healthcare regulations were barred by the Emergency Disaster Treatment Protection Act; and (4) the AG sought damages not available as a matter of law.

In February 2024, we further moved for leave to conduct discovery under C.P.L.R. § 408, arguing that the AG had cherry-picked only favorable evidence and should be required to turn over anything tending to exculpate the respondents.  In parallel, we filed three Article 78 petitions against the New York Attorney General’s Office, the New York State Executive Chamber, and the New York State Department of Health, seeking access records concerning matters of public health and policy relevant to respondents’ defense to the petition. 

In November 2024, after more than a year of hard-fought litigation on these multiple fronts, and on the eve of our filing a response and 100-page brief in opposition to the petition, the AG agreed to a settlement of $45 million—less than half the amount it had originally demanded, and nearly 80% of which will be put back into the nursing homes to be used towards improving resident care and staffing.  The settlement also avoided the risks of a trial and significant potential additional costs.  The settlement represents an important victory for Quinn Emanuel’s Government and Regulatory Litigation and Health Care practices, demonstrating the power of creative strategy and aggressive litigation in creating incentives for settlement.