Pomerantz Saves an NYC Homeless Facility

By the Editors

Pomerantz Senior Counsel Marc I. Gross, a securities class action attorney with a decades-long record of fiercely litigat­ed successes on behalf of defrauded investors, embodies the generous spirit of community service in his pro bono work.

In his latest pro bono action, Marc intervened to provide a lifeline to Mainchance, a longtime midtown Manhattan homeless facility that had been threatened with closure by Mayor Eric Adams. To do so, he and his Pomerantz team filed an Article 78 proceeding – a civil lawsuit in New York State Supreme Court that challenges the legality of a New York State agency or official’s actions.

For over 35 years, Mainchance has operated a vital 24/7 Drop-In Center and food pantry in midtown. Drop-In Centers offer homeless individuals a place to sleep overnight on a first-come-first-served basis, along with meals, showers, medical services, and housing counseling. In the last year, over 45,000 visits were made to the facility. Drop-In Centers provide an alternative to shelters, which offer longer stays, to which many homeless individuals are resistant.

Despite receiving high ratings for its performance of essen­tial services, as well as maintaining partnerships with local institutions like NYU Langone and Baruch College, Main­chance was told in January 2024 that the NYC Department of Homeless Services (“DHS”), which funds its operation, was terminating Mainchance’s contract on June 30, 2024, two years before its expiration. No explanation was provided.

At the time, Marc was a volunteer at Mainchance’s Food Pantry and a member of its Board of Directors. Faced with the demise of what he knew to be a much-needed midtown institution and the loss of more than 30 jobs, Marc tapped Pomerantz associate Stephanie Weaver, paralegal Simon Hall, and legal assistant Taryn Sayre to help him fight the proverbial battle with City Hall.

At the outset, the task seemed especially daunting, given that Mainchance’s contract allowed the City to cancel at any time “without cause.” Undaunted, the Pomerantz team pressed DHS to provide reasons for the premature termi­nation. At a City Council hearing in April, the DHS Deputy Commissioner said that Mainchance was “underperforming.”

Pomerantz thereupon filed an administrative Notice of Dispute, challenging that characterization as contrary to DHS’ periodic audit reports. DHS formally responded by letter, acknowledging that Mainchance had not underper­formed, and indeed had benefited the neighborhood, but that the agency had decided to move away from the Drop-In Center model to a Safe Haven model. The major difference between the two models is that Safe Havens provide home­less individuals with beds rather than chairs to sleep in over­night. Mainchance responded by applauding the purported policy change and pointing out that it had already submitted a proposal to convert to a Safe Haven. It seemed suspect that, two days before advising Mainchance in writing that it was being terminated because the DHS was moving away from the Drop-In Center model, a DHS spokesperson had touted the Adams administrator’s investment in Drop-In Centers, including one scheduled to be opened this summer, while also acknowledging that Mainchance was the only Drop-In Center the agency had decided to terminate.

Faced with the looming June 30th deadline, Pomerantz filed a petition and a motion for an injunction on June 10, 2024. Fortunately, the Court promptly scheduled a hearing for June 23, after which it entered a temporary restraining order compelling continued funding until a full hearing could be held on July 23, 2024. Marc explained, “As strong as the facts appeared, we had to overcome the high hurdle of the contractual language, which clearly stated that the City could cancel the contract without cause.”

Pomerantz argued that despite this clause (which is standard and adhesive), any government agency decision is subject to court review if it is an “abuse of discretion,” arbitrary or clearly unreasonable (which are the standards for NYS Article 78 claims). This made sense given the exceptional power of governments relative to private contractors. In this case, the decision to terminate was particularly egregious given the homeless clients’ NYS Constitutional Right to Shelter. New York State case law is unsettled on this issue, with some courts holding that the contract language pre-empts any claims under Article 78, which allows proceed­ings to challenge decisions made by state and local govern­ments, while other courts hold that Article 78’s “arbitrary and capricious” standard pre-empts the contractual language.

Fortunately for Mainchance and its clients, Judge Lynn R. Kotler acknowledged that the closure of any shelter in the midst of a homeless crisis made little policy sense, and that the circumstances in this case clearly failed to meet the rea­sonableness standard. On September 19, 2024, the Court handed down a decision and order permanently barring ter­mination of the Mainchance contract prior to its expiration in June 2026.

In light of recent allegations that have surfaced against Mayor Adams, it is possible that the reason he chose to close this particular homeless facility is that is next door to a new, luxury high-rise hotel owned by Turkish business interests. The hotel was built by a Turkish construction company with offices in Brooklyn whose employees made donations to Mayor Adams’ political campaigns. Time will tell whether these entities and individuals are the same donors referenced in the recent indictment of the Mayor. In the meantime, Pomerantz is proud to have fought to save Mainchance, allowing it to continue providing important services to the New Yorkers who need them most.