Price v. Pierce

• Decision Date: 04 August 1987
• Docket Number: No. 86-1906,86-1906
• Citation: 823 F.2d 1114
• Parties: Audrey PRICE, et al., Plaintiffs-Appellants, v. Samuel PIERCE, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1114

823 F.2d 1114

Audrey PRICE, et al., Plaintiffs-Appellants, v. Samuel PIERCE, et al., Defendants-Appellees.

No. 86-1906.

United States Court of Appeals Seventh Circuit.

Argued Feb. 13, 1987.

Decided July 8, 1987.

Rehearing and Rehearing En Banc

Denied Aug. 4, 1987.

Gerald Brask, Jr., Prairie State Legal Service, Wheaton, Ill., for plaintiffs-appellants.

Darryl M. Bradford, Jenner & Block, Anthony J. Steinmeyer, Dept. of Justice, Civil Div., Howard M. Schmeltzer, Anthony J. Ciccone, Jr., Dept. of Housing and Urban Developement, Washington, D.C., for defendants-appellees.

Before WOOD, POSNER, and MANION, Circuit Judges.

POSNER, Circuit Judge.

In 1974 Congress passed a statute "For the purpose of aiding lower-income families in obtaining a decent place to live and of promoting economically mixed housing." 42 U.S.C. Sec. 1437f(a). (A "lower-income family" is one whose income is no more than 80 percent of the median family income in the area. 42 U.S.C. Sec. 1437f(f)(1) (1976), now Sec. 1437a(b)(2).) The statute authorized the Department of Housing and Urban Development to subsidize both existing housing (Sec. 1437f(b)(1)) and newly constructed or substantially rehabilitated housing (Sec. 1437f(b)(2), repealed in 1983). The second provision is the one in issue here, in particular the language authorizing HUD to "make assistance payments pursuant to contracts with owners or prospective owners who agree to construct ... housing in which some or all of the units shall be available for occupancy by lower-income families...."

To implement this part of the new program (the "economically mixed housing" or "Section 8" program as it is often called), Congress appropriated money to HUD to pass along to state housing agencies, such as the Illinois Housing Development Authority (IHDA), which in turn would give it to developers. The developers would bill IHDA a specified amount for each apartment rented to a lower-income family and IHDA would be reimbursed by HUD.

Between 1975 and 1978 IHDA made and HUD approved contracts with seven developers, who agreed to lease 40 percent (a total of 482) of the apartments in certain apartment complexes in the Chicago suburbs to lower-income families, in exchange for rent subsidies under section 1437f(b)(2); the developers also received mortgage subsidies from IHDA. But then IHDA let developers reduce the percentage of apartments rented to lower-income families to 20 percent. The developers got no rent subsidies from IHDA (financed by HUD) on any of the apartments not rented to lower-income families but they still had the benefit of the mortgage subsidies from IHDA, for these subsidies were not tied to the percentage of units rented, or committed to be rented, to such families. Moreover, the more developments over which HUD's subsidies are spread (because the lower the percentage of lower-income housing in each development), the higher are HUD's costs of administering the Section 8 program, though not its subsidy costs.

In 1981 Congress amended the statute to require developers to fulfill their contractual commitments to rent to lower-income families; until then, as we shall see, federal law did not condition entitlement to Section 8 subsidy on the developer's adhering to its commitment. The amendment does not affect contracts made before 1981. See Act of Aug. 13, 1981, Pub.L. 97-35, Secs. 325(1), 371(b), 95 Stat. 357, 406, 431. Nor does the repeal of section 1437f(b)(2) in 1983 affect this case. See Act of Nov. 30, 1983, Pub.L. 98-181, Sec. 209(a)(2), 97 Stat. 1153, 1183.

This suit was brought in 1983 by five persons who earlier that year had made inquiries about the availability of subsidized apartments at three of the six developments, and by an organization that assists lower-income families to find housing. The defendants are the developers, plus the heads of HUD and IHDA. The individual plaintiffs had been told there were no vacancies and had been placed on waiting lists. Only two of them bothered to fill out an application to rent, both at the same development. The suit claims that the individual plaintiffs are third-party beneficiaries of the contracts between IHDA and the developers, that the developers broke the contracts and HUD refused to enforce them, that IHDA violated section 1437f(b)(2), and that IHDA and HUD deprived the individual plaintiffs of property without due process of law. The district court rejected these claims and (so far as pertinent to this appeal) entered judgment for the defendants, after holding that the plaintiffs had standing to bring this suit and after certifying it as a class action on behalf of all similarly situated persons. 615 F.Supp. 173 (N.D.Ill.1985).

The first issue is whether the plaintiffs have standing to sue. The standing of the organization, and of the three individual plaintiffs who never bothered to fill out formal applications, is doubtful but need not be resolved; it is enough, to give us jurisdiction over the case, if one of the plaintiffs has standing. Secretary of the Interior v. California, 464 U.S. 312, 319 n. 3, 104 S.Ct. 656, 660 n. 3, 78 L.Ed.2d 496 (1984). The two who filled out applications do. True, if only they are proper plaintiffs, then among the developer defendants only the one to whom those two plaintiffs applied has an actual controversy with a party, and the other developers should be dismissed from the suit. But as we shall be dismissing the suit anyway, it seems unnecessary and ill-advised to get involved in difficult questions of standing that would neither change the outcome nor enable us to avoid a discussion of the merits. A further point is that this suit was certified as a class action, and perhaps the best way to view the named plaintiffs is as candidates for class representative. If at least one plaintiff had standing when the suit was brought and certified as a class action, and if continuously after that there was a live controversy between at least one defendant and one member of the class (not necessarily a named plaintiff), there is federal jurisdiction. Sosna v. Iowa, 419 U.S. 393, 402, 95 S.Ct. 553, 558, 42 L.Ed.2d 532 (1975). These conditions are satisfied here.

In contesting the standing of the two plaintiffs who filed applications, the defendants point out that eligibility for lower-income housing is not determined until an applicant reaches the head of the waiting list and a vacancy opens up; until then no one can be sure that an applicant would benefit from a favorable decision in this suit. But if the applicant could not sue till there was a vacancy, his suit for an injunction--the premise of which is that the waiting list would be shorter if twice as many apartments were being offered to lower-income families--would be moot as soon as it was ripe.

These two plaintiffs claim without contradiction to have satisfied the formal requirements for eligibility, to have made an application, and to have been placed on the waiting list, and they will get to the head of the list sooner if the developers are ordered to double the number of apartments offered to lower-income persons. So they stand to gain a real benefit from winning this suit. It is true that even if an applicant is formally eligible and makes his interest clear by filling out an application, the developer to whom he has applied may decide not to rent to him; the developer has considerable discretion in this regard, as emphasized in Eidson v. Pierce, 745 F.2d 453, 460-61 (7th Cir.1984), and Hill v. Group Three Housing Development Corp., 799 F.2d 385, 392-93 (8th Cir.1986). Or the applicant may lose interest before he gets to the top of the list. Or the list might be so long, and the applicant so far from the top, that even if the list were shortened because the number of available apartments had doubled he could never hope to reach the top. But these possibilities do not defeat standing. A reasonable probability that a plaintiff will get an apartment that he wants sooner if he wins his suit is a sufficiently tangible expected benefit of suit to confer standing under the liberal principles that prevail nowadays, as is demonstrated by Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 264, 97 S.Ct. 555, 563, 50 L.Ed.2d 450 (1977), a factually similar case. If despite the facts we have recited, which make out a prima facie case of standing, neither plaintiff had a reasonable probability of benefiting from a successful conclusion to this suit, this was something for the defendants to show by producing evidence, which they made no effort to do.

Coming to the merits, we first address the claim that the contracts between the developers and IHDA have been broken and that the plaintiffs are entitled to complain about the breach. The questions are intertwined. There is little doubt that the contracts at one time required the developers to set aside 40 percent of the apartments for lower-income families (actually only 32 percent, for reasons explained later, but this makes no difference); for if the 40 percent figure was merely a maximum the contracts contained a tremendous loophole that would have enabled the developers to receive a mortgage subsidy from IHDA even if they never rented a single apartment to a lower-income person. But the nominal parties to the contracts are IHDA and the developers, and they modified the contracts to reduce the percentage to 20 percent. If the plaintiffs are third-party beneficiaries, however, this modification, having been made without their consent, may not have been effective. See Restatement (Second) of Contracts Sec. 311 (1979). Or may have been, as we shall see.

A footnote in the plaintiffs' opening brief asserts that the law governing the contract issues is federal common law. As the defendants take no issue with this assertion we shall treat it as a binding stipulation; we have noted many times that parties to a lawsuit are, within broad limits,...