In the Matter of Kevin Moran v James V. McDonald, as Commissioner of Health; and In the Matter of Mary M. Dunn et al. v James V. McDonald, as Commissioner of Health
Attorneys and Parties
Brief Summary
Licensure of funeral directors and exam integrity relating to the National Board Examination (NBE) and alleged harvesting/sharing of exam content by a funeral service school’s leadership.
The Department of Health (DOH), via an Administrative Law Judge whose findings were adopted by the Commissioner, sustained charges that petitioners violated Public Health Law § 3455 (1) (a) [any person who obtains or aids in obtaining a license by any false or fraudulent statement or representation commits a misdemeanor; substantiated violations must be reported for prompt prosecution] and imposed penalties including suspension or revocation of licenses.
The Commissioner’s administrative determination finding violations of Public Health Law § 3455 (1) (a) and imposing penalties.
Petitioners did not themselves make any false or fraudulent statements, and DOH’s aiding theory failed because Laws of 2018, ch 270, § 1 [created a presumption that all then-licensed funeral directors had successfully passed the NBE, rebuttable only after notice and hearing] established an unrebutted presumption that there was no underlying fraud by the licensees; without an underlying fraud, aiding liability cannot stand.
Background
Petitioners are licensed funeral directors who served as leaders and instructors at the American Academy McAllister Institute of Funeral Service, Inc. (AAMI). The International Conference of Funeral Service Examining Boards alleged in 2013 that AAMI personnel solicited and compiled students’ recollections of National Board Examination (NBE) questions and shared them with AAMI students. The Conference brought federal claims (copyright, trade secrets, tortious interference), obtained a warrant to seize AAMI materials, and later settled in 2014 with a permanent injunction against AAMI’s solicitation or collection of nonpublic exam content, without any admission of wrongdoing. The Conference then unilaterally invalidated the NBE passing results of 300 AAMI graduates and notified jurisdictions. In 2018, DOH told 94 New York licensees with invalidated scores that they had to reestablish valid scores, prompting disruption and litigation. The Legislature enacted Laws of 2018, ch 270, § 1, creating a presumption that all then-licensed funeral directors had successfully passed the NBE, rebuttable only after notice and a hearing; DOH concedes it never attempted to rebut the presumption. Also in 2018, DOH charged petitioners under Public Health Law § 3455 (1) (a) [any person who obtains or aids in obtaining a license by any false or fraudulent statement is guilty of a misdemeanor; mandatory referral to the Attorney General for prompt prosecution under § 3455 (5)], asserting a conspiracy to induce applicants to violate the statute by harvesting and sharing exam content. An Administrative Law Judge sustained the charges and recommended suspension or revocation, which the Commissioner adopted. Petitioners commenced CPLR article 78 proceedings [proceeding to challenge a state agency determination], which were transferred, joined, and heard together in the Appellate Division.
Lower Court Decision
After a hearing, the Administrative Law Judge found petitioners liable for violating Public Health Law § 3455 (1) (a) based on directing/assisting students to disclose NBE questions and sharing the content with other students, concluding this aided applicants in obtaining licenses by false or fraudulent statements. The ALJ recommended license suspension or revocation and other penalties, and the Commissioner adopted the report and recommendations in full.
Appellate Division Reversal
Assuming without deciding that DOH could proceed administratively under § 3455 and that the claims were not time-barred (despite petitioners’ arguments referencing CPL 30.10 [2] [c] [two-year statute of limitations for misdemeanors] and § 3455 [5]’s mandatory referral), the court annulled the determination. The court held that petitioners’ alleged harvesting and distribution of exam questions did not involve any false or fraudulent statement by petitioners. DOH’s alternative theory—that the false statements were the applicants’ reported passing scores—failed because Laws of 2018, ch 270, § 1 created an unrebutted presumption that the then-licensed funeral directors had validly passed the NBE. Without an underlying fraud, an aiding-fraud theory cannot stand (citing Oster v Kirschner and related authorities). The court characterized DOH’s reading of § 3455 as tortured and found the legislative presumption dispositive, rendering petitioners’ remaining arguments academic. The petitions were granted and the administrative determination annulled without costs.
Legal Significance
The decision limits DOH’s ability to use Public Health Law § 3455 (1) (a) in administrative discipline where the alleged misconduct involves exam content sharing rather than a false or fraudulent statement by the licensee or the accused. It underscores that the 2018 legislative presumption validating then-existing funeral director licenses bars reliance on the Conference’s invalidations unless DOH first rebuts the presumption after notice and hearing. Agencies cannot recast breaches of private nondisclosure agreements into statutory ‘false or fraudulent’ licensure violations, and aiding liability requires a provable underlying fraud.
Absent proof of a false or fraudulent statement and in the face of an unrebutted statutory presumption that licensees validly passed the NBE, DOH cannot discipline school officials under Public Health Law § 3455 (1) (a) on an aiding theory; the Commissioner’s determination was annulled.