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April 2, 1973

Irene GASAWAY et al., Plaintiffs,
Georgia McMURRAY, Individually and as Commissioner of the Agency for Child Development and Jule M. Sugarman, individually and as Commissioner of the Human Resources Administration of the City of New York, Defendants

Robert J. Ward, District Judge.

The opinion of the court was delivered by: WARD

ROBERT J. WARD, District Judge.

In this action plaintiffs attack the method by which the New York City agency administering the City's day care program has terminated funding the Evergreen Day Care Center ("Evergreen"). They claim that the procedure employed in terminating the funding of Evergreen denies them due process and violates both the Social Security Act and regulations of the United States Department of Health, Education and Welfare ("HEW").

 Plaintiffs, other than Charlene Pridger, are members of the Board of Directors of Evergreen. Charlene Pridger, is the parent of a child attending Evergreen and is representative of other parents of Evergreen children. Their complaint seeks declaratory and injunctive relief under the Civil Rights Act, 42 U.S.C. § 1983 and the Social Security Act, 42 U.S.C. § 601 et seq. Defendants are the Commissioner of the Agency for Child Development ("ACD") and the Commissioner of the Human Resources Administration of the City of New York.

 An evidentiary hearing was held before this Court in March, 1973 on plaintiffs' motion for a preliminary injunction. For the reasons discussed below, the Court grants plaintiffs' motion for a preliminary injunction and denies defendants' motion for an order dismissing the complaint.

 Title IV, part A of the Social Security Act, 42 U.S.C. § 602 et seq. (1972), guarantees to complying states reimbursement of 75% of all funds spent by the state on its social services program. The New York State plan, including day care services, was approved by HEW. The plan authorizes local officials to "purchase" day care services from private non-profit corporations. N.Y. Social Services Law § 410 3(a) (McKinney's Consol. Laws, c. 55, 1972). ACD, created by a New York City Executive Order, *fn1" is a division of the Human Resources Administration of the City of New York, and is the local agency responsible for the day care program funded under Title IV, part A and the State plan. See N.Y. Social Services Law § 410-b (McKinney 1966).

 The City's day care program is designed to enable qualified parents to maintain gainful employment while their pre-school age children are properly cared for and instructed. A center providing day care services which is qualified to receive funds may secure "sponsorship" by ACD. ACD reviews the facilities and program of the center, and if qualified, sends a "letter of intent to fund" to the center. Evergreen was funded by ACD from May, 1971 until the present dispute arose.

 The gravamen of plaintiffs' complaint is that ACD froze Evergreen's checking account, announced that the facility would be closed, and ceased paying Evergreen's bills as of February 28, 1973, without a proper due process hearing *fn2" as required by Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970), and the regulations promulgated by HEW as authorized by the Social Security Act, 42 U.S.C. § 1302 (1969). *fn3"

 Defendants, on the other hand, contend that "gross fiscal irregularities" and health violations, caused ACD to cease "purchasing services" from Evergreen. Defendants argue that plaintiffs have not shown a protected interest which ACD has taken from them without due process of law. Rather, the interim funding guidelines governing the relationship between ACD and Evergreen provide for a maximum of two years of interim funding. Therefore, the defendants argue that the "purchase of services" agreement here has terminated "according to its own provisions".


 This Court has jurisdiction of the subject matter of this action under 42 U.S.C. § 1983 and its jurisdictional counterpart, 28 U.S.C. § 1343(3). The plaintiffs have alleged deprivation of their due process rights under the Fourteenth Amendment resulting from the cessation of funding without a pre-termination hearing. In welfare cases jurisdiction under § 1343(3) will properly lie so long as a colorable constitutional claim is raised. Lewis v. Martin, 397 U.S. 552, 90 S. Ct. 1282, 25 L. Ed. 2d 561 (1970); Dandridge v. Williams, 397 U.S. 471, 90 S. Ct. 1153, 25 L. Ed. 2d 491 (1970); Rosado v. Wyman, 397 U.S. 397, 90 S. Ct. 1207, 25 L. Ed. 2d 442 (1970). The facts as set forth here present such a colorable claim.

 In reaching this conclusion the Court notes that the parents and children using the Evergreen facilities are the real aggrieved parties. Defendants argue that Evergreen, as a corporate entity, *fn4" receives the benefits of ACD funding directly; therefore, at best a state cause of action for breach of contract is stated here. *fn5" However, the real beneficiaries of a viable day care center program are the parents and children who use it. They are the aggrieved parties when the funding of the center ceases. Evergreen is merely the conduit through which benefits are passed on to working families. The Court believes that the manner in which benefits are ultimately received by plaintiffs is not a significant factor in evaluating their constitutional allegations.

 Defendants also contend that benefits to the parents and children have not been terminated because the children and staff of Evergreen have been offered space in a nearby center, pending the completion of a new center which will eventually house them. Thus, defendants conclude that no colorable claim has been stated under Goldberg v. Kelly, supra. In that case, the Supreme Court held that New York City welfare recipients faced with the termination of their benefits were entitled to a pre-termination evidentiary hearing. The Court determined that the due process challenge "cannot be answered by an argument that public assistance benefits are 'a "privilege" and not a "right"'" 397 U.S. at 262, 90 S. Ct. at 1017, and concluded that "when welfare is discontinued, only a pre-termination evidentiary hearing provides the recipient with procedural due process." 397 U.S. at 264, 90 S. Ct. at 1018.

 The Court finds that substantial benefits would be lost by relocation at the neighboring center, the Irving Place Child Development Center ("Irving"), under the circumstances as presented at the hearing. The Chairman of the Parents Advisory Committee of Irving testified that there was great hostility to the proposed transfer from parents of children presently at Irving. In addition, this witness testified that 86 pre-school children attend Irving, more than the center is actually authorized to enroll. No evidence was presented by defendants to refute these allegations. Under these circumstances, it can hardly be argued by defendants that no benefits to Evergreen parents and children would be lost by relocation at Irving.

 The Court therefore finds that the loss of adequate day care facilities without a due process pre-termination hearing as established in Goldberg v. Kelly, supra, presents a colorable ...

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