## Facts

- Louis Hodes and Herman Surkis owned and operated Franklin Park Nursing Home, a licensed residential health-care facility in New York.
- In 1979, each pleaded guilty to third-degree grand larceny based on fictitious invoices and unearned Medicaid reimbursements.
- After sentencing, each received a certificate of relief from disabilities under Correction Law article 23.
- Under former Public Health Law (PHL) § 2806(5), an “industry-related felony” required automatic revocation of a nursing home operating certificate, while Correction Law § 701(2) barred automatic forfeiture of a covered license when a certificate of relief had been issued.
- The Department of Health first revoked petitioners’ operating certificate, but the Court of Appeals annulled that revocation because Correction Law § 701 prevented automatic revocation in light of the certificates of relief.
- Following that decision, the Legislature amended PHL § 2806(5) and narrowed the effect of certificates of relief in this licensing context.
- The Commissioner then initiated a second administrative proceeding to revoke the same operating certificate, relying on the amended statute and the same 1979 convictions.

## Issues

1. Whether res judicata bars a second administrative license-revocation proceeding based on the same felony convictions after a final judgment annulled a prior revocation under earlier law.
2. Whether petitioners had a vested right to continued licensure that prevents application of amended statutory grounds for revocation.

## Decision

- The New York Court of Appeals reversed the Appellate Division.
- The Court held that neither vested rights nor res judicata barred the Department of Health from commencing a second revocation proceeding under amended PHL § 2806(5).
- The Court permitted the second administrative proceeding to go forward.

## Legal Principles

- A regulated license does not create a vested right to be free from later legislative changes that impose new conditions or grounds for revocation within the State’s police power.
- A judgment annulling an administrative determination under prior law resolves only the legality of that determination under the law then in effect; it does not confer permanent immunity from later-enacted regulatory standards.
- Res judicata generally does not preclude a new enforcement proceeding when the controlling law has materially changed after the prior judgment, even if the proceeding relies on the same underlying historical facts.
- Statutes regulating ongoing licensure may be applied in a proceeding commenced after enactment even when pre-enactment convictions serve as the factual predicate, where the statute operates on present licensing status rather than imposing retroactive punishment.

## Conclusion

The Court of Appeals held that petitioners’ prior success in overturning an automatic revocation under earlier statutes did not prevent the State from pursuing revocation anew under later amendments, because petitioners had no vested right against future public-health regulation and claim preclusion did not extend to proceedings grounded on a post-judgment change in governing law.


Matter of Hodes v. Axelrod, 70 N.Y.2d 364, 520 N.Y.S.2d 933, 515 N.E.2d 612 (N.Y. 1987)