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HOUSING WORKS, INC. v. TURNER

November 29, 2001

HOUSING WORKS, INC., BRUNO ALICIA, JAMES ARNOLD, PAUL ALSTON, DOUGLAS CHO-HILL, REYES CRUZ, PATRICK D. DOLBY, DEXTER C. DUSKIN, EARL C. ELLIS, YVETTE GREGORY, BARRY HARRIS, IESHA JACKSON, DONILE KNIGHT, TAKEASHA NEWTON, LAVERNE PATENT, TATIA SMITH, VELISA GREEN SUMMERLIN, JAN THURMAN, ROBERT TOLBERT, ROBERTO VALDERRAMA, PLAINTIFFS
v.
JASON TURNER, HUMAN RESOURCES ADMINISTRATION (HRA) ADMINISTRATOR/DEPARTMENT OF SOCIAL SERVICES COMMISSIONER, MARK HOOVER, FIRST DEPUTY COMMISSIONER OF HRA, AND THE CITY OF NEW YORK, DEFENDANTS. HOUSING WORKS, INC., PLAINTIFF, V. RUDOLPH GIULIANI, MAYOR, CITY OF NEW YORK; RANDY MASTRO, DEPUTY MAYOR, CITY OF NEW YORK; FRAN REITER, DEPUTY MAYOR, CITY OF NEW YORK; ELIZABETH KASWAN, CHIEF PROCUREMENT OFFICER, CITY OF NEW YORK; LOU-ELLEN BARKAN, CHIEF OF STAFF TO DEPUTY MAYOR RANDY MASTRO; LILLIAM BARRIOS-PAOLI, HUMAN RESOURCES ADMINISTRATION (HRA) COMMISSIONER; JASON TURNER, HRA COMMISSIONER; GREGORY CALDWELL, HRA DEPUTY COMMISSIONER, DIVISION OF AIDS SERVICES AND INCOME SUPPORT (DASIS); JOHN A. DERESZEWSKI, DASIS DIRECTOR OF CONTRACT SERVICES; RICHARD BONAMARTE, HRA AGENCY CHIEF CONTRACTING OFFICER; JACK MCKAY, HRA GENERAL COUNSEL; NEAL L. COHEN, DEPARTMENT OF HEALTH (DOH) COMMISSIONER; MITCHELL NETBURN, DOH AGENCY CHIEF CONTRACTING OFFICER; JAMES CAPOZIELLO, DOH ACTING AGENCY CHIEF CONTRACTING OFFICER; THE CITY OF NEW YORK; AND JACK HIRALALL, P.C., DEFENDANTS.



The opinion of the court was delivered by: VICTOR Marrero, United States District Judge.

    DECISION AND ORDER

Plaintiff Housing Works, Inc., together with nineteen of its client-members (hereinafter collectively referred to as "Housing Works"), is, by its own admission, a vociferous and opinionated community-based, not-for-profit corporation, advocating on behalf of persons living with HIV and AIDS, many of whom are often homeless and drug-dependent. Housing Works initiated these actions against the City of New York (hereinafter the "City") and several high-ranking municipal officials, including the Mayor, pursuant to Title VII of the Civil Rights Act, 42 U.S.C. § 1983 for alleged violations of the First and Fourteenth Amendments to the United States Constitution. Housing Works also brought a number of claims under New York State and City law. Defendants have moved under Rule 12(c) of the Federal Rules of Civil Procedure to dismiss all claims. Because Housing Works has alleged facts sufficient to support its federal and state constitutional claims and because the present controversy raises a legal issue of first impression in this Circuit, the motions are granted in part and denied in part.

I STANDARD OF REVIEW

When a party, after the filing of an answer, moves for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) on the grounds of failure to state a claim, the court may employ the same standards applicable to a motion brought pursuant to Rule 12(b)(6). Nat'l Ass'n of Pharmaceutical Manufacturers, Inc. v. Ayerst Laboratories, 850 F.2d 904, 910 n.2 (2d Cir. 1988); see also Davidson v. Flynn, 32 F.3d 27, 29 (2d Cir. 1994).

Therefore, in the context of the present motion, the Court accepts the well-pleaded assertions of fact in the complaint as true and draws all reasonable inferences and resolves doubts in favor of the non-moving party. See Kaluczky v. City of White Plains, 57 F.3d 202, 206 (2d Cir. 1995) (citations omitted). The focus of the Court's inquiry is not whether plaintiffs will ultimately prevail, but whether the claimants are entitled to an opportunity to offer evidence in support of their claims. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183 (1984). Therefore, a motion to dismiss under either Rules 12(c) or 12(b)(6) for failure to state a claim will be denied "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

II FACTS AND PROCEDURAL HISTORY

The present action, spanning a relevant time period of ten years, names as defendants the City and sixteen municipal employees or agents. The long and complex history of the case requires a thorough recitation for purposes of this motion. Accepting, as it must, the well-pleaded allegations in the complaint as true, the Court acknowledges the following factual assertions as set forth in the pleadings.*fn1

A THE PARTIES

Housing Works is a leading not-for-profit organization which administers programs dedicated to serving persons living with HIV/AIDS. Its mission is to provide critical housing and support services to its clients. Housing Works claims to be unique among its peers in that it focuses on assisting persons with the most pressing problems, often so severe that other organizations regularly turn them away. Housing Works's clients are often homeless, "desperately ill, often emotionally troubled, chemically dependent, financially crippled, and socially disgraced."*fn2

The organization's mission has a simple philosophical underpinning — supportive housing coupled with critical support services is the best prescription for fostering independent, self-sustaining lifestyles and a return to productive activities among its clients. According to Housing Works, this prescription has achieved notable success. Prior to the events leading up to this action, Housing Works purports to have served more than 10,000 homeless persons living with AIDS, many of whom lived, and continue to live, productive and independent lives.*fn3

Housing Works also seeks to provide a comprehensive range of services. In addition to its core housing mission, it offers case management services, substance abuse and mental health counseling, client legal services, medical monitoring, job training, and a theater project.

Defendants include the City and sixteen municipal employees or agents, acting in their individual, and in some cases their official, capacities. The Complaints also identify several municipal agencies with which those individuals are associated.

The Giuliani Complaint names Mayor Rudolph W. Giuliani (hereinafter "Giuliani") as its primary defendant. Housing Works claims that Giuliani was the principal policy-maker with respect to all of the municipal agencies relevant to the action. Along with Giuliani, the complaint alleges that his deputies Randy Mastro (hereinafter "Mastro"), Fran Reiter (hereinafter "Reiter") and Reiter's Chief of Staff Lou-Ellen Barkan ("Barkan") were also involved in the alleged wrongdoing as policy-makers acting in their individual and official capacities. In addition, the Giuliani Complaint names as a defendant the City Chief Procurement Officer, Elizabeth Kaswan (hereinafter "Kaswan"), in her role as policy-maker with respect to the Mayor's Office of Contracts (hereinafter "MOC").*fn4

One of the principal municipal agencies at issue in this case is the New York City Human Resources Administration (hereinafter "HRA"), which includes the New York City Department of Social Services. According to the Complaints, HRA had primary responsibility for administering several housing programs and for certifications relating to various federal, state and municipal projects, as well as municipal benefits. Housing Works named two Commissioners of HRA as defendants: Lilliam Barrios-Paoli (hereinafter "Barrios-Paoli"), whose tenure ended some time in 1997 and Jason Turner (hereinafter "Turner"), who presumably succeeded Barrios-Paoli. In addition to the two Commissioners, the Complaints name as defendants the following HRA officials: Richard Bonamarte (hereinafter "Bonamarte"), Agency Chief Contracting Officer of HRA; Jack McKay (hereinafter "McKay"), Acting General Counsel of HRA; Gregory Caldwell (hereinafter "Caldwell"), Deputy Commissioner of HRA in charge of the Division of AIDS Services and Income Support (hereinafter "DASIS"); John Dereszewski (hereinafter "Dereszewski"), Director of Contract Services for DASIS; and Mark Hoover (hereinafter "Hoover"), First Deputy Commissioner of HRA.*fn5

The Giuliani Complaint also identifies officials of the New York City Department of Health (hereinafter "DOH") as defendants. DOH is the municipal agency charged with setting the public health agenda for the City and with implementing effective public health strategies. In dispute here, however, is DOH's role in administering certain agreements with independent contractors, such as Housing Works, to provide initial assessment and case management services to the public. The Giuliani Complaint also names Neal Cohen (hereinafter "Cohen"), Commissioner of DOH; Mitchell Netburn (hereinafter "Netburn"), Agency Chief Contracting Officer for DOH; and James Capoziello ("Capoziello"), Acting Agency Chief Contracting Officer for DOH.*fn6

B THE RELATIONSHIP BETWEEN THE PARTIES

Since its inception in 1991, Housing Works and the City have had a relationship characterized by fragile, oftentimes divisive, programmatic mutual dependence and support. Specifically, Housing Works has operated four programs that it alleges were adversely affected by the City's retaliatory actions: (1) the Intake Program, which seeks to provide initial assessment, case management and crisis intervention for people living with HIV/AIDS who are homeless or threatened with homelessness; (2) the Residential Housing Program, which attempts to secure residential leases for persons living with HIV/AIDS in scattered sites throughout the New York metropolitan area; (3) the Residential Facilities Program, which provides apartment housing in two buildings owned by Housing Works; and (4) the Second Life Job Training Program (hereinafter "JTP") which provides Housing Works clients with a work/study program culminating in full-time employment and related benefits, within the Housing Works organization.*fn8 Through its leasing and purchasing activities, Housing Works held leases on over two hundred residential apartment units and owned outright an additional sixty-eight units as of October 1997.*fn9

Housing Works depended on the City, as well as the state and federal governments, for a substantial portion of its funding. Conversely, the City outsourced a number of critical administrative and operational functions to Housing Works. Housing Works was often at the front line making initial case assessments, securing housing and then providing a range of services to persons living with HIV/AIDS. Stated another way, by virtue of its programs, Housing Works had a "vendor" relationship with the City in which Housing Works would provide housing and support services in return for reimbursement from public funds at a later date.*fn10

The relationship between the parties was not merely an ad hoc arrangement calling for occasional reimbursements when proof of services provided was submitted. According to Housing Works, the parties had a long-term contractual relationship reflected in at least three separate agreements.

1 The Scattered Site and Ryan White Enhancement Contracts

In 1992, Housing Works and the City, through HRA, entered into a written agreement (hereinafter the "Scattered Site Contract") to provide housing for people living with AIDS. Pursuant to the Scattered Site Contract, Housing Works provided private residential housing and supportive services to persons living with AIDS and their families referred to Housing Works by HRA. To meet its obligations under the Scattered Site Contract, Housing Works would advance rents to private landlords and absorb the initial costs of supportive services. The parties contemplated that the City would later reimburse Housing Works for those costs.

The initial term of the Scattered Site Contract lasted for three years, and it appears from the record that the agreement was extended to on or about June 30, 1997. When it was entered into, the Scattered Site Contract had an annual value of close to $1 million and covered approximately forty households. Through various amendments and extensions, the value of the Contract increased to $4.3 million, covering two hundred households.

To meet its obligations under the Scattered Site Contract, Housing Works held 180 residential apartment leases to accommodate the referrals from HRA. These apartments were scattered throughout Manhattan, Brooklyn, Queens and the Bronx. In administering the Scattered Site program, Housing Works also leased commercial real estate in the Bronx for its administrative offices under a ten-year agreement.

Apart from the Scattered Site Contract, Housing Works also received a supplement from federal funds made available by DOH. The supplement was disbursed to Housing Works through HRA by operation of a separate agreement, the Ryan White Enhancement Contract (hereinafter the "Ryan White Contract"). Pursuant to the Ryan White Contract, Housing Works provided supplemental social services to the participants of the Scattered Site program. The Ryan White Contract had an annual value of approximately $187,700.

2 The DOH Intake Contract

In June 1997, Housing Works and the DOH completed negotiations on a three-year agreement (hereinafter "DOH Intake Contract"), contemplating the provision of general intake, assessment and referral services by Housing Works to persons living with AIDS. In return for providing these services, the City, through DOH, would later reimburse Housing Works. Although Housing Works began performing intake services on July 1, 1997, the DOH Intake Contract was not formally executed until August 18, 1997, and it is unclear whether the DOH Intake Contract was never properly registered by the City Comptroller's Office as required by law or simply terminated.

The DOH Intake Contract had an annual value of $150,000, and Housing Works contends that it continued to provide services under the agreement for six to nine months without receiving any reimbursement.

3 Housing Works's History of Financial Mismanagement

From its inception in 1991, Housing Works grew at a fast clip. The increase in the number of persons and households covered under housing and support contracts described above clearly attest to that fact. As often occurs in periods of rapid growth, the systems that Housing Works first implemented became inadequate as the magnitude of certain tasks expanded. By late 1995, Housing Works concedes that its accounting systems could no longer adequately track its fiscal situation. The organization became entangled in a financial crisis, severely affecting cash flow and impeding its ability pay its creditors and employees.

According to Housing Works, it informed HRA of the looming financial crisis as soon as the situation was discovered. Consultations with HRA led to the hiring of professional accounting firms for the purpose of developing and implementing a corrective action plan. These consultations with HRA and the accountants took place during the Spring and Summer of 1996.

For the better part of 1996, HRA closely monitored Housing Works's finances and the ongoing implementation of the corrective plan. By December 1996, Housing Works contends that it had fully implemented the corrective measures and that HRA expressed its satisfaction that proper measures had been put into place. According to Housing Works, HRA's satisfaction was formally memorialized in an internal memorandum in which Dereszewski indicated that Housing Works had successfully implemented a nine-point corrective action plan. Subsequently, in August 1997, Housing Works asserts that HRA provided MOC with a memorandum making an affirmative finding of Housing Works's responsibility as a contractor.

Therefore, although Housing Works concedes that it had financial management problems in the past, it underscores that those problems ended as of December 1996, when it successfully implemented the corrective action plan and received formal recognition of the corrective measures.

C HOUSING WORKS'S CONSTITUTIONALLY PROTECTED ACTIVITIES

Although the City, its various social services agencies and Housing Works were enmeshed in several mutually dependent and supportive contractual arrangements, the Court has already noted that these relationships were marred by divisiveness. According to Housing Works, this aspect of the parties' relationships was attributable to Housing Works's vigorous advocacy on behalf of persons living with AIDS. In keeping with its vision of a broad-spectrum organization dedicated to enhancing the lives of those afflicted with HIV/AIDS, Housing Works not only arranged for housing and provided critical support services, it also argued vigorously in various fora on behalf of persons living with HIV/AIDS.

As alleged in the Giuliani Complaint, "Housing Works has long been a vocal and militant critic of the Giuliani Administration's attempts to cut and restrict essential services and benefits provided for low-income people with HIV and AIDS."*fn11 The group staged a number of protests against the Mayor and the municipal agencies responsible for social services. In one of the more dramatic exploits, Housing Works members participated in a "coalition demonstration," which attempted to block rush hour traffic at local bridges and tunnels.*fn12 In another, eleven people were arrested during a Housing Works protest for chaining themselves to desks at the Mayor's campaign headquarters.*fn13 The Complaints also detail an almost routine participation by Housing Works in annual demonstrations, such as World AIDS Day, disruptions at HIV policy planning meetings and instances of civil disobedience in front of City Hall.

There is no dispute between the parties that the activities described above are protected by the First Amendment and analogous provisions of the New York State Constitution.

D THE ALLEGATIONS OF RETALIATION

The crux of Housing Works's federal claims is that in response to its vocal criticism of the Giuliani Administration's HIV/AIDS policies, the City and the individual defendants retaliated against Housing Works by, inter alia, refusing to renew its contracts with the City and by preventing Housing Works from securing any future funding in connection with municipal, state and federal grants. The Complaints allege the following retaliatory measures.

1 The City's Refusal to Renew the Scattered Site and Ryan White Contracts

In or about January 1997, Reiter advised Caldwell to conduct a subsequent audit of Housing Works's financial records relating to the Scattered Site Contract for the time period between July 1, 1994 and December 31, 1996. According to Housing Works, the time frame recommended was deliberately and narrowly tailored to capture the years corresponding to its financial crisis, and Reiter recommended the audit notwithstanding the approval by the relevant municipal agency, HRA, of Housing Works's corrective plan. For the purposes of this audit, Caldwell, acting through HRA, retained the firm of Jack Hiralall, P.C. to conduct the accounting.

In the subsequent months, Housing Works made repeated inquiries as to the status of the Scattered Site Contract, which was set to expire on June 30, 1997, and as to the prospects for renewal. According to Housing Works, Barrios-Paoli, Bonamarte, Dereszewski and other HRA Defendants falsely stated that the City was on the verge of extending the Scattered Site Contract. HRA Defendants made similar representations in connection with the Ryan White Contract which was set to expire on March 3, 1997. Housing Works alleges that these officials made specific statements causing it to believe that both of the Contracts would be renewed for an additional one-year term. These statements were allegedly made in order to induce Housing Works to continue to perform under both Contracts without reimbursement beyond their respective termination dates.

Throughout this period of uncertainty, Housing Works continued to advance rent payments to landlords pursuant to the Scattered Site Contract and to provide supplemental services to Scattered Site clients pursuant to the Ryan White Contract. Beginning in August 1997, the City refused to reimburse Housing Works for the services that it continued to provide. On October 16, 1997, Housing Works filed a notice of claim with the City Comptroller for past due amounts on services provided. By that point, the relationship between the parties had become strained to the point where Housing Works began planning a demonstration to protest the City's actions. The organization began distributing flyers announcing a demonstration to be held on October 22 at HRA's offices to protest the City's refusal to reimburse Housing Works for services provided since July 1, 1997.

Housing Works alleges that, as word began to leak, the City was plotting its response. The Mayor's Office, MOC and DOI communicated extensively with each other about the impending demonstration. According to Housing Works, "[d]uring the days leading up to the October 22, 1997 demonstration (and thereafter), defendants Mastro, Barkan, Kaswan, and other representatives of the Mayor's Office and MOC methodically located each and every contract or potential contract involving Housing Works and proceeded to systematically stop them all from being consummated, registered, or in any way advanced."*fn15

Apparently, Housing Works's protest went ahead as scheduled. Immediately following the demonstration, the HRA issued a press release which stated: "[b]ased on the latest audit report, which found over $500,000 in funds unaccounted for by Housing Works, HRA could not renew the Housing Works scattered site contract which expired on June 30, 1997 or enter into new contracts."*fn16 According to Housing Works, the allegations of financial mismanagement were a pretext for retaliation against it for its exercise of protected First Amendment rights.

2 The Refusal to Recognize the DOH Intake Contract

After having formally executed the DOH Intake Contract on August 18, 1997, Housing Works continued to perform its obligations under the agreement in subsequent months. According to Housing Works, on October 23, 1997, the day after the HRA press release and shortly after the filing of Housing Works's notice of claim, the Mayoral, MOC, and DOH Defendants arranged to have the DOH Intake Contract pulled from the Comptroller's Office before it could be registered.

E THE ALLEGATIONS OF CONTINUING RETALIATION

In addition to the City's allegedly unlawful refusal to renew the Scattered Site and Ryan White Contracts and to register the DOH Intake Contract, Housing Works claims that the City instituted a blanket policy against it, again in retaliation for its criticism of the City's AIDS policies, which prevented Housing Works from securing any additional contracts.

1 HRA's New Scattered Site Contract

On October 6, 1997, HRA released a request for proposals (hereinafter "RFP") for a new scattered site program to commence July 1, 1998, covering 1,130 apartment units earmarked for persons living with AIDS. The RFP included some of the units previously administered by Housing Works in its Scattered Site program. Housing Works's units were put up for bids in three separate categories, which identified Housing Works as a current vendor. The rules of the RFP prohibited any one applicant to bid on more than one unit increment within a category.

Pursuant to the RFP, bidders identified as current vendors were given a distinct and measurable advantage over prospective bidders because all potential awardees were rated on a scale of 1-100, with 30 points allocated to the bidder's experience. The points in the experience category were much easier to obtain with the current vendor label.

On November 16, 1997, shortly after the demonstration and the HRA press release, Caldwell and Dereszewski amended the RFP, which had the effect, according to Housing Works, of making it impossible for it to recover the approximately 200 units that it once had under its administration. HRA achieved this effect by altering the categories and the unit increments available for bidding. Notwithstanding the amendment, Housing Works submitted a proposal under the terms of the initial RFP, admittedly hoping to obtain a judicial order requiring HRA to proceed under the framework of the original RFP.

In response, Caldwell wrote to Bonamarte recommending that Housing Works's proposal be rejected as unresponsive and unreviewable. Thereafter, Housing Works amended a state court complaint to add a cause of action for retaliation based on the amended RFP. A week later, HRA amended the REP again.

The second amended RFP permitted Housing Works to bid on all its existing apartments, but it dramatically altered Housing Works's status from that of current vendor to non-incumbent bidder. The disadvantage was fatal. Housing Works alleges that even Dereszewski conceded that the revision to non-incumbent status made it "extremely difficult, extremely unlikely" that Housing Works would score the necessary points to bid successfully.*fn18 In or about June 1998, Housing Works's proposal was rejected.

2 Additional Funds under the Ryan White Care Act

In 1997, the Medical Health Research Association of New York City, Inc. (hereinafter "MHRA"), a private contractor that administers funds made available pursuant to the Ryan White Care Act, issued an RFP for the provision of support services, including harm reduction and day treatment for persons living with AIDS. According to the Giuliani Complaint, Housing Works was the successful bidder on the MHRA Ryan White funds, which had an annual value of $450,000. Housing Works alleges that the subject of the MHRA Ryan White funds arose in the same conversation with Netburn described above. Like the DOH Intake Contract, the MHRA Ryan White Contract was subject to the City's policy that it would take no action on any contract with Housing Works until the completion of the Scattered Site investigation.

3 The 9th Street and East New York Residences

From 1992-97, Housing Works negotiated with federal, state and City officials for financial assistance in the opening and operation of two residences, located on 9th Street in Manhattan and in East New York, Brooklyn, dedicated exclusively to persons living with AIDS. According to the Giuliani Complaint, the parties agreed upon the final terms of the operating contracts sometime in June or July 1997. The conclusion of the negotiations was marked by a final agreement entered into between Housing Works and HRA in July 1997.

Thereafter, HRA repeatedly informed Housing Works that the operating contract for the residences was being processed. According to Housing Works, it was notified on October 22, 1997 that HRA would not enter into any new contracts with Housing Works, including the operating contract for the residences.

4 Housing Works's Job Training Program and the New York State Welfare-to-Work Initiative

As part of its broad service offerings, Housing Works also operates a "Second Life Job Training Program" (hereinafter "JTP").*fn19 The JTP provides a rigorous nine-month work/study program which concludes with the graduates' guaranteed employment in an administrative position within the Housing Works organization. The JTP boasts a 75 percent retention rate for graduates after one-year of employment. The JTP works in conjunction with DASIS to ensure that JTP participants receive the vocational, medical, clinical and supportive services and benefits they need.

On October 5, 1998, the New York State Department of Labor (hereinafter "NYSDOL") and the New York State Department of Health (hereinafter "NYSDOH") issued an RFP as part of their Welfare-to-Work Initiative, which provided funding for projects designed to promote job training for people living with HIV/AIDS. Funding under the Initiative was contemplated to begin on March 1, 1999, with awardees receiving $600,000 over two years. As a precondition for selection, applicants were required to obtain the written approval of the local services district, which for Housing Works was HRA.

Before the final awards were made, Housing Works contends, Turner wrote a letter to the Commissioner of NYSDOL on February 23, 1999, informing the Commissioner that the City was withdrawing its prior certification of Housing Works's application under the RFP. The correspondence stated as the grounds for the City's ...


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