16 F.3d 1204 (Fed. Cir. 1994), 91-1483, Katz v. Cisneros

Docket Nº:91-1483.
Citation:16 F.3d 1204
Party Name:Alfred J. KATZ, in his capacity as General Partner of Hollywood Associates Limited Partnership, Plaintiff-Appellant, v. Henry CISNEROS, in his capacity as Secretary of the United States Department of Housing and Urban Development, and Executive Office of Communities and Development and Housing Allowance Project, Inc., Defendants-Appellees.
Case Date:February 15, 1994
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1204

16 F.3d 1204 (Fed. Cir. 1994)

Alfred J. KATZ, in his capacity as General Partner of

Hollywood Associates Limited Partnership,

Plaintiff-Appellant,

v.

Henry CISNEROS, in his capacity as Secretary of the United

States Department of Housing and Urban Development, and

Executive Office of Communities and Development and Housing

Allowance Project, Inc., Defendants-Appellees.

No. 91-1483.

United States Court of Appeals, Federal Circuit

February 15, 1994

Page 1205

        E. Peter Parker, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., of Boston, Massachusetts, argued for plaintiff-appellant. With him on the brief was Michael S. Gardener. Of counsel was Tracy A. Miner.

        Mary K. Doyle, Attorney, Department of Justice, of Washington, D.C., argued for defendants-appellees. With her on the brief were Stuart M. Gerson, Assistant Attorney General, A. John Pappalardo, United States Attorney and Barbara C. Biddle, Attorney.

        Linda Morley, Housing Allowance Project, Inc., of Springfield, Massachusetts, represented the defendants-appellees.

        Before MAYER, LOURIE and RADER, Circuit Judges.

        MAYER, Circuit Judge.

        Alfred J. Katz, in his capacity as General Partner of Hollywood Associates Limited Partnership (Hollywood Associates), appeals the July 3, 1991, order of the United States District Court for the District of Massachusetts, dismissing its plea for mandamus and transferring its claims for declaratory judgment, breach of contract, breach of federal common law duty, third party beneficiary of contract, and quantum meruit to the Court of Federal Claims. We reverse and remand.

Background

        The Section 8 Moderate Rehabilitation Program of the United States Housing Act of 1937 was enacted to "aid[ ] low-income families in obtaining a decent place to live and [to] promot[e] economically mixed housing...." 42 U.S.C. Sec. 1437f(a). The Section 8 Program is administered by the Department of Housing and Urban Development (HUD) through Public Housing Agencies (PHAs), with whom HUD contracts to carry out the program at the local level. Pursuant to its contract with HUD, and with the approval of HUD, a PHA seeks proposals from private developers who wish to participate in the program. The PHA then enters into an Agreement to Enter into a Housing Assistance Payments (AHAP) contract with selected developers. The AHAP contract provides that upon successful completion of a project, the developer or project owner will enter into a Housing Assistance Payments (HAP) contract with the PHA.

        Both the AHAP and the HAP contracts contain provisions setting out the amount of contract rent, which represents the total amount of rent payable to the project owner, and is the sum of rent paid by a tenant family and rent paid by the PHA on the family's behalf. 24 C.F.R. Secs. 813.102, 882.102. Contract rent is calculated in accordance with HUD regulations, and is based on the project owner's costs of acquiring, owning, managing and maintaining the rehabilitated units. Id. Sec. 882.408. While the project owner is responsible for obtaining the

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necessary financing to carry out these functions, he may include the monthly amortization cost of such financing in the calculation of the contract rent. Id. Sec. 882.408(c).

        Following the execution of either the AHAP or the HAP contract, the PHA is entitled to adjust the amount of contract rent for specified reasons, for example, to reflect actual costs of rehabilitation, id. Sec. 882.408(d)(2), or to correct errors in computing the base and contract rents, in order to comply with HUD regulations, id. Sec. 882.408(d)(1)(v). HUD regulations also provide that after the completion of the rehabilitation, the PHA "must then establish the Contract Rents as provided in Sec. 882.408 which will be subject to reduction based on a post audit." Id. Sec. 882.507(c).

        For the purpose of their motions before the district court, the parties did not dispute the following facts. In 1985, Housing Allowance Project, Inc., the Executive Office of Communities and Development (EOCD), 1 and HUD approved Hollywood Associates' proposal to rehabilitate existing housing stock and to provide 176 low-income rental units in Springfield, Massachusetts. Hollywood Associates then secured a conditional commitment from BayBank Valley Trust for a loan of $6,600,000 at an annual interest rate of 12% for the 15-year loan period. With this commitment, Hollywood Associates entered into an AHAP contract with Housing Allowance. The AHAP contract set forth contract rents based on the proposed cost of rehabilitating and operating the project, including the terms of the financing Hollywood Associates expected to obtain from BayBank. After the AHAP contract was executed, Hollywood Associates learned that it could obtain financing through the Commonwealth of Massachusetts Teller Bond Program at a base interest rate of 9.25%. To obtain this rate, however, it had to pay initial costs, including origination points, letter of credit fees, and other credit and legal fees. It purchased the Hollywood Project and obtained financing through the Teller Bond Program.

        After the renovation of the Hollywood Project was complete, Housing Allowance inspected the project and determined that the work had been carried out in accordance with the AHAP contract. These two parties therefore entered into a HAP contract with the approval of EODC and HUD. Hollywood Associates secured tenants to occupy the project and Housing Allowance began paying the contract rents that had been specified in the AHAP contract and subsequently in the HAP contract.

        In December 1988, HUD conducted an audit of all Section 8 projects administered by EOCD and Housing Allowance in Springfield, Massachusetts, and in April 1990 informed those two entities that the contract rents being paid to Hollywood Associates were too high. This conclusion was based on HUD's determination that its regulations required the contract rents to be based on the actual 9.25% interest rate Hollywood Associates obtained from the Teller Bond program. HUD ordered Housing Allowance to reduce the contract rents paid to Hollywood Associates and to recover all overpayments within 12 months.

        Hollywood Associates challenged HUD's interpretation of the regulations governing the calculation of contract rents. It asserted that the up-front costs incurred to obtain the lower base rate should be factored in to produce an "effective" interest rate of 11.28%. At that rate the amount of the contract rents it is entitled to receive under the HAP contract would not be affected. Hollywood Associates filed suit in the district court after administrative appeals failed.

        In its complaint before the district court, Hollywood Associates set out a plea for mandamus (Count I) and for a declaratory judgment (Count II), and claims for breach of federal common law duty (Count III), breach of contract (Count IV), third party beneficiary of contract (Count V) and quantum meruit (Count VI). It also moved for a preliminary injunction against all the defendants. HUD challenged the jurisdiction of the district court and moved to dismiss. The court denied

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Hollywood Associates' motion for a preliminary injunction and dismissed the demand for mandamus, but it transferred the remaining claims to the United States Court of Federal Claims. 2

        The district court held that the Court of Federal Claims has jurisdiction pursuant to the Tucker Act, 28 U.S.C. Sec. 1491(a)(1), 3 because Hollywood Associates' claims 1) are against the United States, 2) seek relief in excess of $10,000, and 3) are founded on a government contract. It then analyzed whether one of the four sources asserted by Hollywood Associates confers concurrent jurisdiction on the district court.

        First, the court rejected the contention that it had federal question jurisdiction under 28 U.S.C. Sec. 1331. It thought that while the interpretation of a federal statute and regulations is at issue, the case is founded in contract and is within the exclusive jurisdiction of the Court of Federal Claims. The district court also rejected Hollywood Associates' argument that section 1404(a) of the Housing Act confers jurisdiction because it found no applicable waiver of sovereign immunity. Similarly, the court saw no jurisdiction under the Administrative Procedure Act (APA), 5 U.S.C. Secs. 701-706, because it believed an adequate remedy exists in the Court of Federal Claims. Finally, it held that the Mandamus Statute, 28 U.S.C. Sec. 1361, is not satisfied because Hollywood Associates has an adequate remedy short of mandamus--again the breach of contract suit in the Court of Federal Claims. Hollywood Associates filed an interlocutory appeal in this court in accordance with 28 U.S.C. Sec. 1292(d)(4).

Discussion

        Hollywood Associates...

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