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January 9, 1976

Samuel WINDHAM et al., Plaintiffs,
The CITY OF NEW YORK et al., Defendants

The opinion of the court was delivered by: POLLACK

POLLACK, District Judge.

 Plaintiffs have moved for a preliminary mandatory injunction principally against the defendant Agency for Child Development (hereafter "ACD") which has terminated its monetary support as of December 31, 1975 of the Samuel's Temple Day Care Center (hereafter "Center") located in the Borough of Manhattan, New York. The plaintiffs consist of the Center, its affiliated church, and representatives of parents of children who attend the Center.

 The defendant ACD is a division of The New York City Human Resources Administration (hereafter "HRA") which is also a defendant. The other defendants named in the complaint include various social welfare agencies, officials and employees of New York City, as well as four private corporations who are not sought to be enjoined in this proceeding.

 An evidentiary hearing was held in respect to the motion, and an opportunity for oral argument was provided both to counsel and to the plaintiff Samuel M. Windham, the director of the Center and due deliberation was had thereon. For the reasons which appear hereafter, the motion for a preliminary injunction is denied.

 Although plaintiffs' complaint does not clearly assert a ground for federal relief, plaintiff's theory, as presented at the hearing, appears to be that the defendant ACD violated the Due Process clause of the Constitution by terminating the payments to the Center without first providing a hearing to the Center and the parents served by it. A government agency must conduct a hearing where it proposes to deprive a person of funds or benefits to which he has a "legitimate claim of entitlement;" such a claim constitutes a property interest which enjoys the protections of due process. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972).

 A preliminary injunction may be granted only where the moving party has demonstrated a combination of probable success on the merits and the possibility of irreparable injury, or, in the alternative, where there are serious questions going to the merits and the balance of hardships tips decidedly in the movant's favor. Brown & Williamson Tobacco Corp. v. Engman, 527 F.2d 1115 (2d Cir., 1975). As a threshold matter, therefore, it is essential for the moving parties to make a reasonable showing of entitlement to funds and benefits from ACD, and that ACD has deprived them of such benefits without a hearing. Since the plaintiff Center and the plaintiff parents do not necessarily stand in the same posture, it will be helpful to consider their claims separately.

 As is shown hereafter, the plaintiff Center has failed to make a showing that it has the requisite property interest in continued funding from the defendant.

 The Center, which has been in operation since 1969, has received financial support from ACD since December 1, 1970. As of a recent date, the Center had been serving 437 children of 332 parents, and it is the only child care program in its area which has provided services on a twenty-four hour day basis, seven days a week.

 The Center derives the bulk of the funding of its program from ACD. Since it is located in a structural facility which has not been licensed by the Department of Health of New York City, it is not eligible for state or federal funds, and although the situation in the remote past is unclear, ACD has received no reimbursement from federal funds for its payments to the Center for at least the past 18 months.

 On or about November 1, 1975, ACD was notified by HRA that its overall budget would be cut by some $29,000,000 as a consequence of New York City's well-known fiscal condition. ACD consequently determined that funding for 28 day care programs, of which the plaintiff Center was one, would not be continued after December 31, 1975. The agency has not initiated funding of any day care centers to which it was not previously obligated since it was notified of the cut in the funds available to it. The Center was notified of ACD's decision to terminate the funding of its child care program in a mailgram dated November 21st and by a letter dated November 24, 1975. The November 24th letter advised the Center of the applicable procedures for the transfer of services to other day care facilities.

 In distinction to an earlier notification to the Center dated February 24, 1975 that its program funding would shortly thereafter be terminated (which decision was apparently rescinded), the notifications sent in November did not advise the Center that it had an opportunity to controvert the reasons for the termination at a hearing. Rev. Windham requested such a hearing in a letter dated December 11th to the defendant Betti S. Whaley, the Commissioner of ACD. Although no formal evidentiary hearing was held pursuant to that request, a meeting was held at Rev. Windham's request on December 23rd in the office of HRA Administrator James R. Dumpson, at which defendants Dumpson and Whaley were present to discuss the basis for ACD's decision. At that time, Rev. Windham was advised that the Center's funding was terminated because the facility in which the program is located was unlicensed and its condition was unlicenseable. Rev. Windham disputes the latter and contends that the Center has failed to obtain a license because of fault on the part of the City's agencies. Non constat, the Center is unlicensed.

 ACD normally engages the services and facilities of day care centers by approving a budget of a center's expenses, and authorizing a center to procure the goods and services represented in the budget. The authorization provided by ACD is subject to periodic review. ACD's financial relationship with the plaintiff Center has been more tentative in recent years than is envisioned in the normal procedure, as a consequence of an investigation into an alleged misuse of funds by Rev. Windham conducted by HRA and the New York City Department of Investigation, of which the defendant Scoppetta is Commissioner. No criminal or other proceedings have resulted from this investigation, which began in July 1973.

 The plaintiff Center has no contract with ACD which obligates the latter to provide funding on a permanent basis. Under the state statute authorizing the day care program, ACD's relationship with the Center was merely that of purchaser with a seller of day care services. N.Y.Soc.Serv.Law § 410(3)(a) (McKinney Supp.1975). Hence, the plaintiff Center has no statutory or contractual entitlement to continued funding.

 While the Center's interest in continued funding may have been of considerable importance to it, it does not constitute a property interest which is protected by the Fourteenth Amendment. Board of Regents v. Roth, supra. It is clear that the Due Process clause does not require a government agency to conduct a hearing whenever it fails to renew a contract with a private business, even where that contract constitutes the sole ...

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