Bfno Props., LLC v. Hous. Auth. of New Orleans

• Decision Date: 16 April 2015
• Docket Number: CIVIL ACTION No. 15-300 SECTION "E"(5)
• Parties: BFNO PROPERTIES, LLC and TUCKER PROPERTY HOLDINGS, LLC Plaintiffs, v. HOUSING AUTHORITY OF NEW ORLEANS, ET AL., Defendants
• Court: U.S. District Court — Eastern District of Louisiana

BFNO PROPERTIES, LLC and TUCKER PROPERTY HOLDINGS, LLC Plaintiffs, v. HOUSING AUTHORITY OF NEW ORLEANS, ET AL., Defendants

CIVIL ACTION No. 15-300 SECTION "E"(5)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

April 16, 2015

ORDER

Before the Court is a Motion to Remand filed by Plaintiffs BFNO Properties, LLC and Tucker Property Holdings, LLC.¹ For the reasons set forth below, Plaintiffs' Motion to Remand is DENIED.

BACKGROUND

Plaintiffs BFNO Properties, LLC and Tucker Property Holdings, LLC are the owners and operators of Jackson's Landing North and Jackson's Landing South, apartments located in New Orleans, Louisiana in the area referred to as Algiers.² Defendant Housing Authority of New Orleans ("HANO") is a public housing authority that assists in providing affordable housing to low and moderate-income families in New Orleans.³

In 2002, the U.S. Department of Housing and Urban Development ("HUD") determined that HANO was in substantial default of its obligations under its contract with HUD, which authorized HUD to force HANO into federal receivership.⁴ While HANO was under receivership, HUD appointed David Gilmore to be the Executive Administrator and Receiver ("Administrative Receiver") for HANO.⁵

In December 2010, HANO entered into Housing Assistance Payments Contracts with Plaintiffs for the Section 8 Project-Based Voucher Program at Jackson's Landing North and South ("the HAP Contracts").⁶ David Gilmore signed the HAP Contracts on HANO's behalf.⁷ The purpose of the HAP Contracts "is to provide housing assistance payments for eligible families who lease contract units that comply with the HUD [Housing Quality Standards] from the owner[s]."⁸ Effective December 31, 2010 for a term of 15 years, the HAP Contracts require Plaintiffs to reserve certain units in Jackson's Landing North and South for low-income tenants in return for HANO makinghousing assistance payments to Plaintiffs for the difference between the low-income tenants' contributions and the rent specified in the HAP Contracts.⁹

David Gilmore also signed a Decision Memorandum dated March 26, 2014 regarding the use of certain rent comparables for the calculation of Plaintiffs' reasonable rent increases.¹⁰ In Gilmore's affidavit attached to Plaintiffs' petition, he states that he signed the Decision Memorandum and authorized the movement of tenants from one apartment to another during reconstruction of the apartment complexes.¹¹ In July of 2014, HANO was returned to local control, and Gregg Fortner was appointed as Executive Director of HANO to lead the transition.¹²

On January 20, 2015, Plaintiffs filed a petition in the Civil District Court for the Parish of Orleans, State of Louisiana seeking damages for breach of contract and injunctive relief against HANO and Dwayne G. Bernal, Alice Reiner, Toni Hackett Antrum, Glen M. Pilie, and Vonda Rice, in their capacities as members of HANO's Board of Commissioners.¹³ Plaintiffs' petition makes the following allegations:

(1) "HANO owes plaintiffs in an amount exceeding $250,000 for funds wrongfully recaptured and/or withheld that HANO refuses to pay plaintiffs, and said amount continues to increase monthly as HANO wrongfully recaptures and/or withholds funds owed to plaintiffs based on the [HAP] contracts;"¹⁴

(2) "Plaintiffs have not received any new tenants for the Project-Based Housing Choice Voucher Program since June of 2014 and have a number of vacancies which should have been filled;"¹⁵

(3) "HANO has refused to abide by the agreement[s] made between plaintiffs and HANO" that were approved by David Gilmore while HANO was in receivership and under his absolute control as Executive Administrator (i) "regarding the moving of tenants during the reconstruction of the facilities," and (ii) "approv[ing] a Rent Reasonableness (Rent Increase Request) authorizing plaintiffs to use rent comparables furnished by a state licensed appraiser for the calculation of reasonable rent increases;"¹⁶ and

(4) "HANO has refused to recognize the rent increases that became automatic once Jackson's Landing Apartments North was recognized as a tax credit property in 2014."¹⁷

Plaintiffs seek remand of their action to state court for "funds due to [them under their contractual agreements with HANO] as well as damages, costs, attorney's fees, and equitable relief.¹⁸ The petition also requests a temporary restraining order, a preliminary injunction, and a permanent injunction to stop HANO from monthly recapturing and/or withholding any funds due to Plaintiffs.¹⁹ Before removal, the state court issued a temporary restraining order prohibiting HANO or anyone acting at its direction from wrongfully recapturing and/or withholding future or past rents and any other funds due to Plaintiffs.²⁰ The temporary restraining order expired on January 30, 2015 at 12:00 pm.²¹

On January 30, 2015, Defendants removed the case to this Court, asserting in the notice of removal that the Court has federal question subject-matter jurisdiction.²² On February 11, 2015, Plaintiffs moved to remand the case to state court arguing that the petition asserts no federal claims and, therefore, the Court lacks subject-matter jurisdiction over this case.²³ Plaintiffs argue in their memorandum that their state courtpetition brings claims solely for breach of contract arising under Louisiana law.²⁴ On February 25, 2015, Defendants filed an amended notice of removal further specifying the federal statutes and regulations they claim support removal under 28 U.S.C. § 1331.²⁵ On February 25, 2015, Plaintiffs also filed a motion to expedite consideration of the motion to remand.²⁶ The Court granted the motion to expedite,²⁷ and the motion to remand is now under submission.

LAW AND ANALYSIS

"Federal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and statute."²⁸ However, "federal courts have a 'virtually unflagging obligation . . . to exercise the jurisdiction given them.'"²⁹ Pursuant to 28 U.S.C. § 1441, a defendant may remove an action from state court to federal court if the action is one over which the federal court possesses original jurisdiction.³⁰ The removing party bears the burden of proving federal subject-matter jurisdiction exists and thus removal is proper.³¹ In order to determine whether jurisdiction exists, thefederal court considers the claims in the state court pleadings as they existed at the time of removal.³² Any doubt as to whether removal jurisdiction is proper should be resolved in favor of remand because removal jurisdiction must be strictly construed.³³

In this case, there is no allegation of diversity jurisdiction; thus, there must be federal question jurisdiction for removal to be proper.³⁴ District courts have federal question jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States."³⁵ Cases "arise under" federal law in one of two ways. Most commonly, federal question jurisdiction is invoked when a plaintiff pleads a cause of action created by federal law.³⁶ "There is, however, another longstanding, if less frequently encountered, variety of federal 'arising under' jurisdiction . . . ."³⁷ That is, federal question jurisdiction will lie if "a well-pleaded complaint establishes . . . that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law."³⁸

Plaintiffs argue the allegations in the petition do not present a claim created by federal law, raise a substantial issue of federal law, or provide any other statutory,constitutional, or jurisprudential basis for the exercise of federal court jurisdiction.³⁹ For this reason, Plaintiffs contend this case must be remanded to state court for lack of federal subject-matter jurisdiction. Defendants contend the petition "alleges claims which arise under and are governed by federal law and/or arise under and are governed by Acts of Congress regulating commerce," including but not limited to Section 6(j) of the United States Housing Act of 1937, codified as 42 U.S.C. § 1437d(j) ("Section 6(j)"), and certain HUD federal regulations.⁴⁰ Defendants further argue that "Plaintiffs' state court Petition raises claims that both arise under federal law and raise substantial federal questions," and, even if Plaintiffs were bringing only claims for state law breach of contract, "the (inapplicable) contractual provisions that Plaintiffs cite in the motion to remand are so inextricably intertwined with the federal statutes and regulations at issue that Plaintiffs' rights cannot be determined without deciding substantial questions of federal law."⁴¹

Federal question jurisdiction exists when a plaintiff's right to relief necessarily depends on the resolution of a substantial question of federal law.⁴² A case falls under this special category of cases "if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court withoutdisrupting the federal-state balance approved by Congress. Where all four of these requirements are met, . . . jurisdiction is proper because there is a 'serious federal interest in claiming the advantages thought to be inherent in a federal forum,' which can be vindicated without disrupting Congress's intended division of labor between state and federal courts."⁴³ "Ultimately, whether a federal issue embedded in the matrix of a state law claim will support federal question jurisdiction entails a pragmatic assessment of the nature of the federal interest at stake . . . ."⁴⁴

In 1974, Congress amended the United States Housing Act of 1937 to create the Section 8 housing program.⁴⁵ "The Section 8 program is a vast effort on the part of federal, state, and local authorities to provide decent, safe, and sanitary housing to low-income families, the elderly, and the disabled. The program is administered by [HUD] in conjunction with state and local public housing agencies across the...