Grand Cent. Neighborhood Social Servs. Corp. v. Park

2024 NY Slip Op 33292(U)

• Court: New York Supreme Court, New York County
• Decided: September 18, 2024
• Docket: Index No. 155327/2024
• Status: Unpublished

Opinion

Grand Cent. Neighborhood Social Servs. Corp. v Park 2024 NY Slip Op 33292(U) September 18, 2024 Supreme Court, New York County Docket Number: Index No. 155327/2024 Judge: Lynn R. Kotler Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 155327/2024 NYSCEF DOC. NO. 64 RECEIVED NYSCEF: 09/19/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LYNN R. KOTLER PART 08 Justice -------------------X INDEX NO. 155327/2024 GRAND CENTRAL NEIGHBORHOOD SOCIAL SERVICES CORP., MAINCHANCE MOTION DATE 06/11/2024

Petitioner, MOTION SEQ. NO. 001

-v- COMMISSIONER MOLLY WASOW PARK, NEW YORK DECISION, ORDER + CITY DEPARTMENT OF HOMELESS SERVICES, DEPARTMENT OF HOMELESS SERVICES, JUDGMENT

Respondent. --------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,20, 21,22,23,24,25,26,27,28,29, 30, 33,36,37,38,39,40,41, 42,43,44,45,46,47,48,49, 50,51,52,53,54,55,56,57, 58,59,60,61 were read on this motion to/for INJUNCTION/RESTRAINING ORDER

Upon the foregoing documents, this motion is decided as follows. In this special

proceeding, petitioners Grand Central Neighborhood Social Services Corp. ("GCNSSC") and

Mainchance seek an order enjoining respondent Department of Homeless Services ("DHS")

from terminating the parties' contract to operate the Mainchance Drop-In Center

("Mainchance"). Mainchance, which is located at 120 East 32nd Street, has operated for 25 years

and sees approximately 45,000 visits per year. GCNSSC and Mainchance (collectively, the

"Petitioners") argue that DHS arbitrarily terminated the contract.

Respondents are DHS, DHS Commissioner Molly Wasow Park and The New York City

. Department of Social Services. Respondents have answered the petition and contend that the

contract provides an unconditional right to terminate, that they had a reasonable basis to

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terminate the contract, and that Petitioners lack standing to assert the claim on behalf of

Mainchance clients. For the reasons that follow, the petition is granted.

The relevant facts are not in dispute. Mainchance provides services to the homeless,

including meals, showers and professional services, and an overnight sleeping space for their

clients to sleep on a first come/first serve basis. Mainchance was started by GCNSSC in 1989 to

provide 24/7 services to the homeless in Midtown Manhattan. Mainchance offers 70 recliners for

overnight clients, many of them repeat clients, and serves meals to about 300 individuals as well

as providing other mental and medical services during the day. Mainchance does not offer long

term beds but does assist in placing clients in temporary and permanent housing.

Mainchance receives almost all of its funding (over 95%) from DHS and entered into its

most recent contract with DHS on June 15, 2023, ending on June 30, 2026 (the "Contract"). The

Contract includes a termination clause that states: "The City shall have the right to terminate this

Agreement, in whole or in part, without cause, in accordance with the provisions of Section

10.05." Section 10.05 of the Contract provides that upon termination without cause, the City

must provide Petitioners with at least 15 days' notice.

DHS annually audits Mainchance, which received ratings of "excellent" and "good"

across all categories from 2021 through 2023. In October of 2023, DHS expanded Mainchance's

offerings to include medical and psychiatric services performed by NYU Langone staff on site.

Mainchance also provided a September 6, 2022 letter from DHS showing they exceeded their

placement performance for the year, placing 170 transitional and 25 permanent placements,

exceeding their targets of 138 transitional and 21 permanent placements.

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On September 26, 2022, DHS sent a letter to Mainchance's Deputy Executive Director

Jaqueline Connor ("Connor") which stated that in 2022 Mainchance had 180 transitional

placements and 28 permanent placements and set 2023 target numbers at 196 and 26

respectively. This letter_ also raised a complaint by a nonparty that Mainchance had turned a

person away because they were using plastic bags instead of luggage. DHS advised Mainchance

that it must allow clients three days to get a proper bag or provide one. On October 26, 2022,

DHS sent another letter to Mainchance regarding an issue where Mainchance made their showers

unavailable to run a food pantry out of the drop-in center that was serving non-homeless

individuals using DHS funds in violation of the Contract. On December 1, 2022, DHS sent an

additional letter containing complaints that staff were not letting drunk clients in during

midnight/overnight shifts. The letter directed Mainchance to ensure that drunk clients were let in

unless "they are a fighting drunk and belligerent."

A July 31, 2023 letter discusses the semiannual evaluation of placement targets. In this

letter, DHS states that Mainchance had reached 14 permanent placements and 138 transitional

placements, 54% and 70% of their respective targets for the year. A January 31, 2024 letter

provided another update on placement targets, where the target for permanent and transitional

placements was set at 151 but only 51 total placements were made (34%). This letter did note

that the Routine Site Review Inspection conducted on 8/2/23 resulted in "Very Good" ratings for

both the site as a whole and for the food.

DHS also provided a series ofletters sent between October 2023 and February 2024

discussing issues with Mainchance's data entry of clients in their "CARES" system. The

Contract requires that the nightly roster of clients, any permanency plans, and any other clients

entering the facility be entered into the CARES system for tracking.

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As compared to drop-in centers, DHS also provides funding to organizations that operate

so-called "safe havens", which offer similar services. However, instead of chairs for clients to

sleep in, safe havens have beds. The parties do not dispute that New York City is facing a

housing crisis with an uptick in homeless individuals seeking shelter. DHS represents that it

desires to shift from drop-in centers to safe havens to better serve the needs of homeless in the

city. Petitioners point out, however, that Mainchance is the only drop-in center respondents seek

to close.

Mainchance claims that on January 16, 2024, DHS Deputy Director Joslyn Carter

telephoned Connor to inform her that DHS would be terminating the Contract on June 30, 2024.

The following day, DHS Chief of Staff Erica Dean purportedly discussed with Connor the

opportunity to convert Mainchance into a Safe Haven facility. In another conversation on

January 18, 2024, Connor spoke to DHS Associate Commissioner of Capacity, Planning and

Development Ellery Gillette who allegedly agreed to consider a conversion with the landlord's

willingness to perform the necessary renovations.

Working with the landlord, Mainchance submitted a Request for Proposal ("RFP") to

DHS on February 29, 2024 with their plans to convert the drop-in center to a safe haven.

Petitioners' plans "only required installation of a sprinkler system, improved emergency egress

through the rear of the building, and one additional bathroom." Mainchance maintains that it

would be possible to remain in operation as a DIC during renovations, lasting approximately

three months. DHS counters, claiming that Mainchance would need close during the "years, not

months to complete the proposed renovation" and a new Certificate of Occupancy would be

needed to change the use type of the property. On March 7, 2024, DHS denied the RFP and

reiterated that the Contract would be terminated on June 30, 2024.

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Mainchance submitted additional materials to support their RFP on May 8, 2024, which

included blueprints for the conversion and an itemized construction proposal prepared by B&G

Construction which totaled $490,000. On the same day, DHS sent a letter terminating the

Contract as of June 30 "without cause."

Petitioners commenced this CPLR Article 78 proceeding on June 14, 2024 seeking an

order to enjoin Respondents from terminating the contract. Petitioners argue that respondents'

decision to terminate the contract is irrational, arbitrary, and capricious. Meanwhile, respondents

contend that they had "numerous reasons for termination, including budgetary constraints

impacting New York City as a whole, Mainchance's failure to meet its contractual placement

targets, numerous site difficulties, failures to comply with recordkeeping requirements from

2022 to 2024, and DHS's internal assessment of how to better serve its clients."

On July 16, 2024, the Court signed the underlying Order to Show Cause which granted a

Temporary Restraining Order enjoining DHS from terminating the Contract and withholding

funding from Petitioners.

In their answer, respondents argue that forcing them to honor the Contract would be

''usurping the role of DHS to deal with complex issues of providing adequate shelter to its clients

experiencing homelessness" while simultaneously disregarding the needs of the very homeless

they claim to be operating in the best interest of.

Discussion

In an Article 78 proceeding, the applicable standard of review is whether the

administrative decision: was made in violation of lawful procedure; affected by an error of law;

or arbitrary or capricious or an abuse of discretion, including whether the penalty imposed was·

an abuse of discretion (CPLR § 7803 [3]). An agency abuses its exercise of discretion if it lacks a

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rational basis in its administrative orders. "[T]he proper test is whether there is a rational basis

for the administrative orders, the review not being of determinations made after quasi-judicial

hearings required by statute or law" (Matter ofPell v Board of Educ. of Union Free School Dist.

No. 1 ofTowns ofScarsdale & Mamaroneck. Westchester Countv, 34 NY2d 222,231 [1974])

(emphasis removed); see also Matter of Colton v. Berman, 21 NY2d 322, 329 (1967).

"[T]here are circumstances in which the same governmental action may constitute a

violation of contract and also be of a character that would support a claim for article 78 relief'

(Abiele Contr. v New York City School Constr. Auth., 91 NY2d 1, 7-8 (1997 quoting Matter of

Goodstein Constr. Corp. v Gliedman, 117 AD2d 170, 176 [Sandler, J. P., concurring]), affd 69

NY2d 930]). Therefore, petitioners may challenge respondents' contract termination as arbitrary

and capricious pursuant to CPLR Article 78.

DHS contends that it has an "absolute right" to terminate the Contract without cause

pursuant to the termination clause. While DHS did reserve to itself the right to terminate the

Contract, this does not give it the right to do so in an arbitrary and capricious manner.

"A party has an absolute unqualified right to terminate a contract on notice pursuant to an

unconditional termination clause without court inquiry into whether the termination was

activated by an ulterior motive" (Big Apple Car v City ofNew York, 204 AD2d 109, 111 [1st

Dept 1994]), Respondents rely upon Red Apple Child Dev. Ctr. v Community School Dists. Two

which held that "[a] contract terminable without cause does not give rise to a protected property

interest, such as would afford the right to a hearing as to the propriety of the termination (303

AD2d 156, 157 [1st Dept 2003] [internal citations omitted]).

Red Apple is distinguishable, however, because in that case the First Department had

determined that "the decision to terminate had a rational basis, i.e., the DOH's order revoking

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petitioner's permits and directing the closing of its facilities, and was not arbitrary, capricious or

violative of law." Further, Big Apple dealt with a contract claim for monetary damages for bad

faith and wrongful termination rather than an Article 78 claim alleging that the action was

arbitrary. This court does not dispute that unconditional termination clauses are a powerful tool

for the government to operate in an efficient and nimble manner, but they must still have a

rational basis and not be otherwise arbitrary, capricious, or violative of law.

DHS also cites The Institute for Puerto Rican/Hispanic Elderly v. The New York City

Department for the Aging, which was an Article 78 proceeding dismissed by Justice Manuel J.

Mendez because the contract in question had an unconditional termination clause (2012 WL

6682148 [Sup Ct, NY County 2012]). However, Institute is also distinguishable from the facts of

this case. While both contracts contained an unconditional termination clause, the reasons for

exercising the clause vary immensely. In Institute, the petitioner which operated the Corvello

Center since 1991, had recently renewed its contract with the respondent New York City

Department for the Aging ("DFTA"). DFTA renewed the contract with the petitioner because

they were in the process of selecting candidates to submit bids to run the site, with the intention

of selecting the candidate with the highest rating after considering each of the bids (id). Of the

three approved vendors that submitted bids, the petitioner had the lowest rating and another

bidder Carter Burden, who received the highest score, was awarded the new contract, which

resulted in termination of petitioner's contract (id). Therefore, Justice Mendez found that D FTA

had proffered a rational basis to terminate the subject contract.

While DHS asserts in this proceeding that they do not need a rational basis to terminate

the Contract, the court in Institute specifically pointed out "[r]espondents provided a rational

basis for their determination and have not acted arbitrarily or exceeded their authority by

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entering into a contract with Carter Burden" (id). Petitioners signed a contract knowing the

possibility they would lose the bid process and be replaced, whereas here, the DHS has no plan

in place to replace Mainchance with an alternative shelter, essentially reducing the aid provided

to persons suffering housing insecurity based upon the preference for safe havens over drop-in

centers. Yet respondents do not point to a new safe haven that will serve the community

petitioners have served for the past 25 years.

Relatedly, the Court is unpersuaded by respondents' alternative argument that their

decision to terminate the Contract is not irrational, arbitrary, or capricious. Respondents have not

explained why Mainchance is the only drop-in center which petitioners seek to close. Moreover,

the next planned facility to serve unsheltered persons in Manhattan is not a safe haven, but

another drop-in center to be located on 9th Avenue and 52nd Street. Further, DHS' "solution" to

closing down Mainchance is not to replace it with a safe haven, but rather to redirect these clients

to existing facilities in other boroughs such as the Bronx. While Mainchance may have been

below the placement targets in 2023, they exceeded these targets in 2022 and otherwise

maintained high ratings as evidenced by DHS audits from 2020 through 2023. Additionally,

DHS entered into a separate contract with Petitioners to open a sanctuary for migrants in Queens

on May 24, 2024. Finally, respondents fail to address the plethora of other services Mainchance

provides including meals, showers, mental and physical medical care, in addition to the

expanded services which NYU Langone began provided to petitioner's clients at Mainchance in

October 2023. For all these reasons, the court finds that respondents' decision to terminate the

Contract lacked a rational basis and is otherwise arbitrary and capricious.

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Petitioners also claim that respondents have violated Mainchance's clients' rights to

shelter under the New York State Constitution and the Callahan Consent Decree. In light of the

result reached by the court herein, the court declines to consider this argument as moot.

Conclusion

Accordingly, it is hereby

ORDERED and ADJUDGED that the petition is granted and respondents are enjoined

from terminating the contract with petitioner Grand Central Neighborhood Social Services Corp

dated June 15, 2023 to provide services for homeless individuals at the Mainchance Drop-In

Center located at 120 East 32nd Street, New York, New York; and it is further

ORDERED and ADJUDGED that respondents are compelled to provide funding for

Mainchance Drop-In Center's operations consistent with the terms of the contract which expires

on June 30, 2026.

Any requested relief not expressly addressed herein has nonetheless been considered and

is hereby denied and this constitutes the decision, order and judgment of the court.

9118/2024 DATE LYNN R. KOTLER, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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