### 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

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### SUPREME COURT OF THE STATE OF NEWYORK NEW YORK COUNTY PRESENT: HON. LYNN R. KOTLER Justice 

## -------------------X

GRAND CENTRAL NEIGHBORHOOD SOCIAL SERVICES CORP., MAINCHANCE Petitioner,

### -vCOMMISSIONER MOLLY WASOW PARK, NEWYORK CITY DEPARTMENT OF HOMELESS SERVICES, DEPARTMENT OF HOMELESS SERVICES, Respondent. --------------------X PART
INDEX NO. 155327/2024 MOTION DATE 06/11/2024 MOTION SEQ. NO. 001
DECISION, ORDER 

### + JUDGMENT 08

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. Inthis special proceeding, petitioners Grand Central Neighborhood Social Services Corp. ("GCNSSC") and Mainchance seek an order enjoining respondent Department ofHomeless Services ("DHS") from terminating the parties' contract to operate the Mainchance Drop-In Center ("Mainchance"). Mainchance, whichis 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 ofSocial Services. Respondents have answered the petition and contend that the



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

155327/2024 GRANO CENTRAL NEIGHBORHOOD SOCIAL SERVICES CORP. ET AL vs. COMMISSIONER MOLLYWASOW PARK, NEWYORK CITY DEPARTMENT OF HOMELESS SERVICES ET AL
. Motion No. 001 Page 1 of9


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2 of 9 terminate the contract, and that Petitioners lack standing to assert the claim onbehalfof Mainchance clients. Forthe reasons that follow, the petition is granted.

The relevant facts are not in dispute. Mainchance provides servicesto 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 ofthemrepeat 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 termbeds but does assist in placing clients intemporary andpermanenthousing. Mainchance receives almost all ofits funding (over 95%) from DHS and entered into its mostrecent contract with DHS onJune 15, 2023, ending onJune 30, 2026 (the "Contract"). The Contract includes a termination clause that states: "The City shall have the right to terminate this Agreement, inwhole or inpart, without cause, in accordance withthe provisions ofSection 10.05." Section 10.05 ofthe Contractprovides that upon terminationwithout cause, the City mustprovide 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 of2023, DHS expanded Mainchance's offerings to include medical and psychiatric services performed by NYU Langone staffon site. Mainchance also provided a September 6, 2022 letterfrom DHS showing they exceededtheir placementperformance for the year, placing 170 transitional and 25 permanentplacements, exceeding their targets of 138 transitional and 21 permanent placements.

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3 of 9 On September 26, 2022, DHS sent a letter to Mainchance's Deputy Executive Director Jaqueline Connor ("Connor") which statedthatin 2022 Mainchance had 180 transitional placements and 28 permanentplacements 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 ofluggage. DHS advised Mainchance that it must allow clientsthree days to get a proper bag orprovide one. On October 26, 2022, DHS sent another letterto Mainchance regarding an issue where Mainchance made their showers unavailable to run a food pantry out ofthe drop-in centerthat was serving non-homeless individuals using DHS funds inviolation ofthe Contract. OnDecember 1, 2022, DHS sent an additional letter containing complaints that staffwere 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 ofplacementtargets. In this letter, DHS states that Mainchance had reached 14 permanentplacements and 138 transitional placements, 54% and 70% oftheirrespective targets for the year. A January 31, 2024 letter provided another update onplacementtargets, where the target for permanent and transitional placements was set at 151 but only 51 total placements were made (34%). This letter did note thatthe Routine Site Review Inspection conducted on 8/2/23 resulted in "Very Good" ratings for boththe 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 ofclients in their "CARES" system. The Contractrequires that the nightly roster ofclients, any permanency plans, and any other clients entering the facility be entered into the CARES system for tracking.

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4 of 9 As compared to drop-in centers, DHS also provides funding to organizations that operate so-called "safehavens", which offer similar services. However, instead ofchairs for clientsto sleep in, safe havens have beds. The parties do not dispute thatNew York City is facing a housing crisis with anuptick inhomeless individuals seeking shelter. DHS represents that it desires to shift from drop-in centersto safe havens to better serve the needs ofhomeless inthe 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 Connorto inform her that DHS would be terminating the Contract onJune 30, 2024. The following day, DHS ChiefofStaffEricaDean purportedly discussed with Connorthe opportunity to convert Mainchance into a Safe Haven facility. In another conversation on January 18, 2024, Connor spoke to DHS Associate Commissioner ofCapacity, Planning and DevelopmentEllery Gillette who allegedly agreed to consider a conversion with the landlord's willingness to performthe necessary renovations. Working with the landlord, Mainchance submitted a Request for Proposal ("RFP") to DHS on February 29, 2024 withtheirplans to convertthe drop-in center to a safe haven. Petitioners' plans "only required installation ofa sprinkler system, improved emergency egress through the rear ofthe building, and one additional bathroom." Mainchance maintains that it would be possible to remain inoperation 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 proposedrenovation" and a newCertificate ofOccupancy would be needed to change the use type ofthe property. On March 7, 2024, DHS denied the RFP and reiterated that the Contract wouldbe terminated onJune 30, 2024.

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5 of 9 Mainchance submitted additional materials to supporttheir RFP onMay 8, 2024, which includedblueprints for the conversion and an itemized constructionproposalprepared by B&G Construction whichtotaled $490,000. Onthe same day, DHS sent a letterterminatingthe Contract as ofJune 30 "withoutcause." Petitioners commencedthis CPLRArticle 78 proceeding onJune 14, 2024 seeking an orderto enjoin Respondents from terminating the contract. Petitioners argue thatrespondents' decision to terminate the contract is irrational, arbitrary, and capricious. Meanwhile, respondents contend thatthey had "numerousreasons 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 withrecordkeeping requirements from 2022 to 2024, and DHS's internal assessment ofhowto better serve its clients." OnJuly 16, 2024, the Court signedthe underlying Order to Show Cause which granted a Temporary Restraining Order enjoining DHS from terminating the Contract and withholding funding from Petitioners. Intheir answer, respondents argue that forcing them to honor the Contract would be ''usurping the role ofDHS to deal withcomplex issues ofproviding adequate shelter to its clients experiencing homelessness" while simultaneously disregarding the needs ofthe very homeless they claim to be operating in the best interest of. Discussion In an Article 78 proceeding, the applicable standard ofreview is whetherthe administrative decision: was made inviolation oflawful procedure; affected by an error oflaw;
orarbitrary orcapricious or an abuse ofdiscretion, including whetherthe penalty imposed was·
an abuse ofdiscretion (CPLR § 7803 [3]). An agency abuses its exercise ofdiscretion ifit lacks a

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6 of 9 rational basis in its administrative orders. "[T]hepropertest is whetherthere is a rational basis for the administrative orders, the review not being ofdeterminations made after quasi-judicial hearings required by statute orlaw" (Matter of Pell v Boardof Educ. of Union Free School Dist. No. 1 ofTowns of Scarsdale 

### & Mamaroneck. Westchester Countv, 34NY2d 222,231 [1974]) (emphasis removed); see also Matter of Colton v. Berman, 21 NY2d 322, 329 (1967). "[T]here are circumstances in whichthe same governmental action may constitute a violation ofcontract and also be ofa characterthat would support a claim for article 78 relief' (Abiele Contr. v New York CitySchool 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 pursuantto CPLRArticle 78. DHS contends that it has an "absoluteright" to terminate the Contractwithout cause pursuant to the termination clause. While DHS did reserve to itselfthe right to terminate the Contract, this does not give itthe right to do so in an arbitrary and capricious manner. "Aparty 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 anulterior motive" (BigApple Car v City of New York, 204 AD2d 109, 111 [1st Dept 1994]), Respondents rely upon RedApple ChildDev. Ctr. v Community School Dists. Two which held that "[a] contractterminable without cause does not give rise to a protectedproperty interest, such as would afford the right to a hearing as to the propriety ofthe termination (303 AD2d 156, 157 [1st Dept 2003] [internal citations omitted]). RedApple is distinguishable, however, because inthat case the First Department had determined that "the decisionto terminate had a rational basis, i.e., the DO H's order revoking

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7 of 9 petitioner's permits and directing the closing ofits facilities, and was not arbitrary, capricious or violative oflaw." Further, BigApple dealt with a contract claim for monetary damages for bad faith and wrongful terminationrather 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 governmentto operate in an efficient and nimble manner, butthey must still have a rational basis and notbe otherwise arbitrary, capricious, orviolative oflaw. DHS also cites The Institutefor Puerto Rican/Hispanic Elderly v. The New York City Department for theAging, which was an Article 78 proceeding dismissed by Justice Manuel J. Mendezbecause the contract in question had anunconditional 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. InInstitute, the petitioner which operatedthe Corvello Center since 1991, had recently renewed its contract withthe respondent New York City Department for the Aging ("DFTA"). DFTA renewed the contract with the petitioner because they were in the process ofselecting candidatesto submit bids to runthe site, with the intention ofselecting the candidate withthe highestrating after considering each ofthe bids (id). Ofthe three approved vendors that submitted bids, the petitionerhadthe lowestrating and another bidder CarterBurden, who received the highest score, was awarded the new contract, which resulted in termination ofpetitioner's contract (id). Therefore, Justice Mendez found that DFT A hadproffered a rational basis to terminatethe subject contract. While DHS asserts in this proceeding thatthey do not need a rational basis to terminate the Contract, the court inInstitute specifically pointed out "[r]espondents provided a rational basis for their determination and have not acted arbitrarily orexceeded their authority by

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8 of 9 entering into a contract with Carter Burden" (id). Petitioners signed a contract knowing the possibility they would lose the bidprocess andbe replaced, whereas here, the DHS has no plan in place to replace Mainchance with an alternative shelter, essentially reducing the aidprovided to persons suffering housing insecuritybased upon the preference for safe havens over drop-in centers. Yetrespondents do notpointto 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 decisionto terminate the Contract is not irrational, arbitrary, orcapricious. Respondents have not explained why Mainchance is the only drop-in center which petitioners seek to close. Moreover, the next plannedfacility to serve unsheltered persons in Manhattan is not a safe haven, but another drop-in centerto 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 redirectthese clients to existing facilities in otherboroughs such as the Bronx. While Mainchance may have been belowthe placementtargets in 2023, they exceeded these targets in 2022 and otherwise maintained highratings 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
onMay 24, 2024. Finally, respondents fail to address the plethora ofother services Mainchance provides including meals, showers, mental and physical medical care, in addition to the expanded services whichNYU Langone began providedto 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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9 of 9 Petitioners also claim thatrespondents have violatedMainchance's clients' rights to shelter under the New York State Constitution and the Callahan ConsentDecree. In light ofthe result reached bythe court herein, the court declines to considerthis argument as moot. Conclusion Accordingly, itis hereby ORDERED and ADJUDGED that the petition is granted and respondents are enjoined from terminating the contract withpetitioner 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 thatrespondents are compelled to provide funding for Mainchance Drop-In Center's operations consistent withthe terms ofthe contract which expires
onJune 30, 2026. Any requested reliefnot expressly addressed herein has nonetheless been considered and is hereby denied and this constitutes the decision, order andjudgment ofthe court.

9118/2024

DATE CHECK ONE: LYNN R. KOTLER, J.S.C.

APPLICATION: CHECK IF APPROPRIATE: CASE DISPOSED GRANTED**□** DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN

# ~ NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

155327/2024 GRAND CENTRAL NEIGHBORHOOD SOCIAL SERVICES CORP. ET AL vs. COMMISSIONER MOLLY WASOW PARK, NEWYORK CITY DEPARTMENT OF HOMELESS SERVICES ET AL Motion No. 001

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