Order on Housing Mentally Ill Adults in New York City Is Struck Down A federal appeals court, ruling on procedural grounds, struck down on Friday a judge's order that New York State transfer thousands of mentally ill adults in New York City from institutional group homes into their own homes and apartments. In doing so, the court brought a nine-year legal battle to an abrupt end without resolving the underlying issues of how the state cares for such patients. Though the lower court judge had ruled the current system violated federal law by warehousing people with mental illness in far more restrictive conditions than necessary, the appellate panel said the nonprofit organization that began the litigation, Disability Advocates, did not have legal standing to sue. The panel, comprising three judges of the United States Court of Appeals for the Second Circuit, acknowledged that its decision essentially reset the long-running battle to its starting point. "We are not unsympathetic to the concern that our disposition will delay the resolution of this controversy and impose substantial burdens and transaction costs on the parties, their counsel and the courts," the opinion said. The long-term implications for the mental health system are unclear. But it immediately removes the pressure on the state to move more than 4,000 people with mental illness who live in the city's large group homes into what is known as supportive housing, in which patients live alone but continue to receive specialized treatment and services. Josh Vlasto, a spokesman for Gov. Andrew M. Cuomo, said in a written statement that the administration was reviewing the decision. "The governor's commitment to improving the quality of care for vulnerable populations and supporting opportunities for community living for people with disabling conditions is clear," Mr. Vlasto said in the statement. Cliff Zucker, the executive director of Disability Advocates, who less than two years ago was celebrating the lower court's order for immediate changes to the system, said he would now seek to reach a settlement with state officials. "We are hopeful that this administration has recognized that this is a problem that needs to be solved and we'll be able to solve it without recommencing litigation," he said. Barring such a deal, it is also possible that the Justice Department, which intervened late in the case on behalf of the plaintiffs, could file a new lawsuit, Mr. Zucker said. Disability Advocates brought the lawsuit in 2003 after a series of articles in The New York Times described a system in which residents were poorly monitored and barely cared for, left to swelter in the summer and sometimes subjected to needless medical treatment and operations for Medicaid reimbursement. After a five-week nonjury trial in 2009, Nicholas G. Garaufis, the Federal District Court judge overseeing the case, ruled that the practices violated the Americans With Disabilities Act. In a series of subsequent decisions, he ruled that the state must immediately begin moving patients out of the group homes and into supportive housing. The plan, limited to New York City, would have given nearly all current and future adult home residents the opportunity to move into supported housing scattered throughout the boroughs, where they would live independently while also receiving help like case-management services and visits from psychiatrists and nurses. The plan was drawn from a proposal presented by advocates for mentally ill people that was backed by the Justice Department. The state, which has vigorously defended the current system, argued that the advocates had overestimated the demand for supported housing and underestimated the cost, making a quick transition for the bulk of the population in adult group homes unfeasible. The state appealed the ruling. The appellate court suspended the order to begin transferring patients immediately, later lifted the suspension and finally stopped the order again, leading to the ruling on Friday. Although Judge Garaufis's order to transfer thousands of people was not addressed in the ruling, the appellate court said it did "have concerns about the scope of the proposed remedy." "If this controversy continues, and if the renewed litigation reaches the remedial phase, the parties and the district court will have another opportunity to consider an appropriate remedy," the court said. But the heart of the ruling was on the procedural matter over whether Disability Advocates, a private nonprofit organization contracted to provide services for people with mental illness, had the legal standing to sue state agencies and officials on their behalf. On this point the appeals court ruled that Judge Garaufis was wrong. In a statement celebrating the ruling, Jeffrey Edelman, the president of New York Coalition for Quality Assisted Living, which represents adult homes, defended the current system for housing people with mental illness and "the rights of these adults to live in the homes of their choice, rather than becoming the targets of others" dangerous social experiments."