1610 CORP. v. Kemp

• Decision Date: 02 January 1991
• Docket Number: Civ. A. No. 90-11827-C.
• Citation: 753 F. Supp. 1026
• Parties: 1610 CORPORATION, in its capacity as General Partner of Cobbet Hill Associates Limited Partnership, Plaintiff, v. Jack KEMP, in his capacity as Secretary of the United States Department of Housing and Urban Development, and the Lynn Housing Authority, Defendants.
• Court: U.S. District Court — District of Massachusetts

753 F. Supp. 1026

1610 CORPORATION, in its capacity as General Partner of Cobbet Hill Associates Limited Partnership, Plaintiff, v. Jack KEMP, in his capacity as Secretary of the United States Department of Housing and Urban Development, and the Lynn Housing Authority, Defendants.

Civ. A. No. 90-11827-C.

United States District Court, D. Massachusetts.

January 2, 1991.

Tracy A. Miner, Michael S. Gardener, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Boston, Mass., for 1610 Corp.

Judith S. Yogman, U.S. Atty's. Office, Boston, Mass., for Jack Kemp.

Webb F. Primason, Gordon, Moore, Primason & Bradley, Lynn, Mass., for Lynn Housing Authority.

MEMORANDUM

CAFFREY, Senior District Judge.

This case is before the Court on the defendant's, Jack Kemp, Secretary of the United States Department of Housing and Urban Development ("Secretary" or "HUD"), motion to dismiss under Fed.R. Civ.P. 12(b)(1) for lack of subject matter jurisdiction and 12(b)(6) for failure to state a claim. This action arises out of a dispute between the plaintiff, 1610 Corporation, and the two defendants, Lynn Housing Authority ("LHA") and HUD. The plaintiff alleges that defendants breached a Housing Assistance Payment Contract ("HAP") with the plaintiff by wrongfully reducing plaintiff's section 8 housing assistance payments. The plaintiff brought this action alleging breach of contract, promissory estoppel, third party beneficiary, interference with contractual relations, breach of common law duty, and quantum meruit. Plaintiff's complaint also has two counts for declaratory relief and mandamus. For the reasons stated below, this Court holds that it lacks subject matter jurisdiction over the plaintiff's contract claims, and will thus transfer this case to the Claims Court.

I.

The facts as set forth in the verified complaint are as follows. Plaintiff, 1610 Corporation, is the owner of the Cobbet School housing project in Lynn, Massachusetts. In October, 1987, the plaintiff submitted a proposal to the Lynn Housing Authority for the rehabilitation of the Cobbet School project under section 8 of the United States Housing Act of 1937.

LHA accepted the proposal and, with HUD's approval, executed an Agreement to Enter into a Housing Assistance Payments Contract ("AHAP") with the plaintiff. The AHAP delineated the anticipated contract rents for the project, and provided that upon completion of the rehabilitation, LHA would execute a HAP contract obligating LHA and HUD to pay those contract rents agreed upon in the AHAP. The AHAP also stated that the contract rents were subject to change by the LHA in accordance with HUD requirements, including the correction of errors in the computation of the contract rents.

In November of 1987, the plaintiff purchased the Cobbet School project for approximately eleven million dollars. When it had completed all of the renovations, plaintiff certified to LHA that the work had been completed and that its actual costs were the same as those listed in the AHAP. Subsequently, upon review and approval by HUD and by LHA, LHA and the plaintiff entered into a HAP contract which set the monthly contract rents for the project at $109,923. Like the AHAP contract, the HAP contract specified that the contract rents were subject to change in accordance with HUD requirements, including the correction of errors in computation.

From the time the HAP contract was executed on November 29, 1988, until April, 1990, HUD paid to LHA the rent subsidies necessary to permit plaintiff to receive the contract rents as set forth in the HAP contract. On April 13, 1990, however, HUD notified LHA that the rents as set forth in the HAP contract were incorrectly calculated, and that the HAP contract between plaintiff and LHA would have to be changed. This change was allegedly based on an audit prepared by the Office of Inspector General of HUD in September, 1988. Thus, since May 1, 1990, HUD has only paid to LHA, and LHA has paid to plaintiff, the sum of $102,407 each month. In addition, HUD notified the plaintiff that beginning in July, 1990, it would further reduce the monthly payments by $3,393.57 until an alleged over-payment of $122,168.52 was recaptured.

II.

Upon a motion under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, the party asserting jurisdiction bears the burden of proving that the court has jurisdiction. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982); Wright & Miller, Federal Practice and Procedure: Civil 2d § 1350 (1990). There are two different ways of refuting the existence of subject matter jurisdiction. The first is the "facial attack," where it is asserted that the complaint fails to allege facts upon which subject matter jurisdiction can be based. Adams, 697 F.2d at 1219; 27 Fed.Proc., L.Ed. § 62:453 (1984). In the second type of attack, the "factual attack," the party challenging jurisdiction argues that the jurisdictional allegations of the complaint are not true. Adams, 697 F.2d at 1219.

In both types of attacks on jurisdiction, a court will construe the allegations of the complaint favorably to the plaintiff. 27 Fed.Proc., L.Ed. § 62:453 (1984); see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Smith v. Gross, 604 F.2d 639, 641 (9th Cir.1979). In addition, in the case of a factual attack, a court may look to matters outside of the pleadings. Exchange Nat'l Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126, 1130-31 (2d Cir.1976). In the present case, although the parties submitted several short affidavits, it was not necessary to go beyond the pleadings to examine any factual disputes. Such is the case because the defendant has challenged only the federal law character of plaintiff's lawsuit, not any of the critical jurisdictional facts. See Arthur Young & Co. v. Richmond, 895 F.2d 967, 971 (4th Cir.1990).

The Secretary suggests that the only basis for subject matter jurisdiction that may exist over the plaintiff's claims is the Tucker Act, which if applicable provides jurisdiction in the Claims Court. The Tucker Act provides both subject matter jurisdiction and a waiver of sovereign immunity for non-tort claims which seek monetary relief in excess of $10,000 "against the United States ... founded either upon ... any express or implied contract with the United States." 28 U.S.C. § 1346(a)(2); see Army and Air Force Exch. Serv. v. Sheehan, 456 U.S. 728, 738 n. 10, 102 S.Ct. 2118, 2124 n. 10, 72 L.Ed.2d 520 (1982); Armor Elevator Co. v. Phoenix Urban Corp., 493 F.Supp. 876, 887 (D.Mass.1980), aff'd, 655 F.2d 19, 22 (1st Cir.1981). Thus, the Tucker Act establishes three requirements which, if satisfied, vest subject matter jurisdiction in the Claims Court. The action must be against the United States, seek relief over $10,000, and be founded upon a government contract.¹

In the present case, the plaintiff's breach of contract claim and its alleged rights as a third party beneficiary are determined by contract law. See Restatement of Contracts 2d §§ 142, 143. Therefore, because plaintiff seeks to recover over $10,000 in compensatory damages, the contract claims fall within the jurisdiction of the Tucker Act. See Carlyle Gardens Co. v. Delaware State Hous. Auth., 659 F.Supp. 1300, 1307 (D.Del.1987) (suit against HUD and local housing authority over reduction of housing assistance payments within jurisdiction of Claims Court). Therefore, this Court concludes that jurisdiction over the plaintiff's contract claims falls within the jurisdiction of the Claims Court.

III.

The Claims Court's jurisdiction over contract claims in excess of $10,000 is not exclusive provided there is an independent basis for jurisdiction in the district court outside the Tucker Act. Bowen v. Massachusetts, 487 U.S. 879, 910 n. 48, 108 S.Ct. 2722, 2740 n. 48, 101 L.Ed.2d 749 (1988); C.H. Sanders Co. v. BHAP Hous. Dev. Fund Co., 903 F.2d 114, 119 (2d Cir.1990). Thus, it must next be determined whether an independent basis for subject matter jurisdiction exists outside the Tucker Act thereby providing this Court with jurisdiction over the plaintiff's claims. To support its claim for jurisdiction, the plaintiff suggests two sources, 28 U.S.C. § 1331, the federal question statute, and 28 U.S.C. § 1361, the mandamus statute.

First, the plaintiff contends that federal question jurisdiction exists under section 1331(a) as a claim arising under a federal statute or under the Constitution of the United States.² A claim arises under the laws of the United States if the disposition of the issues requires the application of federal law. Shulthis v. McDougal, 225 U.S. 561, 569, 32 S.Ct. 704, 706, 56 L.Ed. 1205 (1912); T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964), cert. denied, 381 U.S. 915, 85 S.Ct. 1534, 14 L.Ed.2d 435 (1965). More specifically, federal question jurisdiction exists if the resolution of the issues requires the application of federal statutory or common law, the imposition of a remedy expressly granted by federal law, or the implementation of a distinctive policy of a federal statute requiring the application of federal legal principles for its disposition. Illinois v. Milwaukee, 406 U.S. 91, 100, 92 S.Ct. 1385, 1391, 31 L.Ed.2d 712 (1972); Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir.1974); Hines v. Cenla Community Action Comm., Inc., 474 F.2d 1052, 1055 (5th Cir.1973).

Generally, obligations arising under a contract are governed by state law. Gully v. First Nat. Bank, 299 U.S. 109, 114-15, 57 S.Ct. 96, 98, 81 L.Ed. 70 (1936); Lindy, 501 F.2d at 1369. Moreover, the fact that a contract is subject to federal regulation does not establish that its interpretation and aspects of its performance are governed by federal law. Weeks Constr., Inc. v. Oglala Sioux Hous. Auth., 797 F.2d 668, 672 (8th Cir.1986); Lindy, 501 F.2d at 1369. Similarly, the mere fact that a contract involves a pre-printed form prescribed by HUD, does not signify that a controversy over its terms arises...