Allied Home Mortg. Corp. v. U.S. Dep't of Hous. & Urban Dev.
| Decision Date | 22 July 2015 |
| Docket Number | No. 14-20523,14-20523 |
| Parties | ALLIED HOME MORTGAGE CORPORATION; JAMES C. HODGE, Plaintiffs - Appellants v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; JULIAN CASTRO, in his official capacity as Secretary of Housing and Urban Development, Defendants - Appellees |
| Court | U.S. Court of Appeals — Fifth Circuit |
Appeal from the United States District Court for the Southern District of Texas
Before JOLLY and DENNIS, Circuit Judges, and RAMOS, District Judge.*
**
James C. Hodge and his company, Allied Home Mortgage Corporation, (collectively, "the appellants") petition the court to determine whether the Department of Housing and Urban Development ("HUD") acted unlawfully in temporarily suspending them from business with the government. During thependency of the case, HUD withdrew the suspensions. We now hold that the case is moot and we therefore dismiss it.1
Under title II of the National Housing Act of 1934, HUD is authorized to insure participating mortgage lenders against loss on loans made to homebuyers. See 12 U.S.C. § 1709. If the borrower of a mortgage insured under title II defaults, HUD reimburses the lender for the amount still owed on the loan. Thus, under the title II insurance program, it is the government, not the lender, that bears the risk of default. The program is intended to promote mortgage lending and homeownership. During the period relevant to this case, the appellants participated in the title II program as lenders of government-insured mortgages.
At some point, the record is unclear when, the Department of Justice ("DOJ") opened an investigation into the appellants. Following the investigation, DOJ concluded that the appellants were responsible for serious, widespread and long-running violations of HUD rules and regulations. DOJ prepared a lawsuit and, before filing, communicated its findings to HUD. (Currently, the DOJ case is pending as United States v. Allied Home Mortg. Corp., No. 4:12-CV-2676 (S.D. Tex.).) On November 1, 2011, HUD suspended the appellants from further business with it, effective immediately.2 The suspensions were to be temporary, to last until the conclusion of the DOJlawsuit and debarment proceedings (used to bar a person from government business for a specified period).3
The following day, November 2, the appellants brought this lawsuit against HUD, seeking a declaration under the Administrative Procedure Act that the suspensions were unlawful and an injunction against enforcement of them. On November 15, the district court granted the appellants a preliminary injunction and ordered HUD to refrain from enforcing the suspensions pending final decision in the case. Allied Home Mortg. Corp. v. Donovan, 830 F. Supp. 2d 223 (S.D. Tex. 2011).
In May 2012, with the case still pending, HUD withdrew the original suspensions and issued two new notices to the appellants. With respect to Allied Home Mortgage Corporation, HUD stated that it was "considering taking an administrative action" against it for specified reasons, and the company was invited to respond. With respect to Hodge, HUD stated that it was proposing his debarment for a period of five years, to be imposed after further proceedings, and he, too, was invited to respond. Neither notice imposed a suspension pending further proceedings. HUD then moved the district court to dismiss the case as moot because the appellants were no longer suspended. The court declined. Allied Home Mortg. Corp. v. Donovan, No. 4:11-CV-3864, 2012 WL 3276978 (S.D. Tex. Aug. 8, 2012).4
On August 5, 2014, the district court reached its final decision and, contrary to the prior preliminary injunction, upheld the suspensions. AlliedHome Mortg. Corp. v. Donovan, No. 4:11-CV-3864, 2014 WL 3843561 (S.D. Tex. Aug. 5, 2014).
This appeal followed.
Article III of the Constitution authorizes the federal courts to adjudicate "Cases" and "Controversies." U.S. Const. art. III, § 2, cl. 1. "A case becomes moot—and therefore no longer a 'Case' or 'Controversy' for purposes of Article III—'when the issues presented are no longer "live" or the parties lack a legally cognizable interest in the outcome.'" Already, LLC v. Nike, Inc., 133 S. Ct. 721, 726-27 (2013) (quoting Murphy v. Hunt, 455 U.S. 478, 481 (1982) (per curiam)). "No matter how vehemently the parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is moot if the dispute 'is no longer embedded in any actual controversy about the plaintiffs' particular legal rights.'" Id. at 727 (quoting Alvarez v. Smith, 558 U.S. 87, 93 (2009)).
Here, the appellants seek a declaration that HUD's suspensions of them were unlawful and invalid. But the suspensions have been withdrawn, and the appellants are no longer suspended from business with HUD.5 The dispute in this case is therefore no longer embedded in an actual controversy about the appellants' legal rights. Absent an exception to the mootness doctrine, the case is moot and must be dismissed. See Alejandrino v. Quezon, 271 U.S. 528, 532 (1926) (); ITT Rayonier Inc. v. United States, 651 F.2d 343 (5th Cir. Unit B1981) (); Westmoreland v. Nat'l Transp. Safety Bd., 833 F.2d 1461, 1463 (11th Cir. 1987) (same, license suspension); Fed. Sav. & Loan Ins. Corp. v. Hykel, 468 F.2d 1386, 1388 (3d Cir. 1972) (same, administrative suspension).
The appellants contend that the case is not moot under the voluntary-cessation doctrine. That rule holds that "a defendant cannot automatically moot a case simply by ending its unlawful conduct once sued." Already, LLC, 133 S. Ct. at 727; see also Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189 (2000); City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289 (1982). "Otherwise, a defendant could engage in unlawful conduct, stop when sued to have the case declared moot, then pick up where he left off, repeating this cycle until he achieves all his unlawful ends." Already, LLC, 133 S. Ct. at 727. Given that concern, once the defendant has ceased its challenged conduct, the plaintiff's challenge to such conduct is moot only if the defendant "bears the formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur." Id. (quoting Friends of the Earth, Inc., 528 U.S. at 190). When the defendant is the government, however, its burden is lighter. We treat the government's cessation of allegedly wrongful conduct "with some solicitude" given that the government, unlike private litigants, is presumed to act in good faith. Sossamon v. Texas, 560 F.3d 316, 325 (5th Cir. 2009); accord Marcavage v. Nat'l Park Serv., 666 F.3d 856, 861 (3d Cir. 2012); Ragsdale v. Turnock, 841 F.2d 1358, 1365 (7th Cir. 1988).
Here, HUD has represented that it will not reinstate the rescinded suspensions, and based on the circumstances of this case we believe it. The appellants have represented to the court that, as a result of the government's actions against them, their lines of credit dried up and their business was"destroyed" and is now without employees or assets. The appellants claim that this is all the result of the temporary suspensions alone. That is doubtful, though. The suspensions aside, the DOJ's lawsuit is proceeding, as are HUD's additional administrative proceedings, and all charge the appellants with the same, or at least substantially similar, misconduct as the suspensions did. The suspensions were enjoined between November 15, 2011 and August 8, 2012, and credit did not return to the appellants during that period. (At least, the appellants have not stated or shown otherwise.) The reasonable inference, then, is that so long as HUD is charging the appellants with serious misconduct and a final determination is pending, the appellants will be in no position to resume mortgage lending, whether suspended as a legal matter or not. In such circumstances, HUD has nothing to gain by reinstating temporary suspensions pending final determination. And, of course, once final determination is reached, the issue will be settled, and there will be no possibility of HUD reinstating the preliminary suspensions. In these circumstances, we find it absolutely clear that there is no reasonable probability that the withdrawn suspensions will be reinstated.6
Even so, the appellants appear to argue that HUD may engage in unspecified subsequent administrative actions different than the suspensions at issue here. This argument misses the mark. The voluntary-cessation inquiry focuses on the potential for recurrence of the conduct challenged in the case or at least "sufficiently similar" conduct. Ne. Fla. Chapter of AssociatedGen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 662 & n.3 (1993). The potential for a future dispute of another nature, presenting other issues, is immaterial. Should such a subsequent dispute arise, it is a matter for another lawsuit, not a reason to keep this one alive. See Texas Office of Pub. Util. Counsel v. F.C.C., 183 F.3d 393, 414 (5th Cir. 1999) () (citation omitted). To the extent that the appellants seek to use this case, which until now has focused on the suspensions, as a vehicle to challenge HUD's debarment proceedings against Hodge and anticipated proceedings against Allied Home Mortgage Corporation, it is obvious that the issues are unripe. We do not yet know what, if any, action HUD will take against the appellants following such proceedings, and it is impossible to anticipate upon what administrative record such action would be based and what justifications would be offered. See Hooker Chem. Co., Ruco Div....
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