Boaz Hous. Auth. v. United States

Decision Date20 December 2018
Docket NumberNo. 17-1797C,17-1797C
PartiesBOAZ HOUSING AUTHORITY, et al., Plaintiffs, v. THE UNITED STATES OF AMERICA, Defendant.
CourtU.S. Claims Court

BOAZ HOUSING AUTHORITY, et al., Plaintiffs,

No. 17-1797C

United States Court of Federal Claims

December 20, 2018

Keywords: Housing Act of 1937; HUD; Breach of Contract; Money Mandating; Holmes v. United States; Presumption of Money Damages.

Carl A.S. Coan III, Coan & Lyons, Washington, DC, for Plaintiffs.

A. Bondurant Eley, Senior Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC, with whom were Franklin E. White, Jr., Assistant Director, Robert E. Kirschman, Jr., Director, and Chad A. Readler, Acting Assistant Attorney General, for Defendant.


KAPLAN, Judge.

The plaintiffs in this breach-of-contract action include over 500 public housing authorities ("PHAs" or "Plaintiffs"), each of which has entered an annual contributions contract ("ACC") with the Department of Housing and Urban Development ("HUD"). They allege that HUD breached the ACCs in 2012, when it did not comply with the regulations that govern the allocation of operating subsidies in circumstances where there are insufficient appropriated funds available to pay them in full. Plaintiffs request an award of damages in the amount of at least $132,507,658, as well as the costs and expenses of bringing this action.

The issues before the Court on the merits of this case are identical to those this Court resolved in Public Housing Authorities Directors Ass'n v. United States, 130 Fed. Cl. 522 (2017) ("Public Housing"). In Public Housing, this Court agreed with the plaintiffs that the government breached its obligations under the ACCs when it applied an operating expense offset in response to the 2012 Appropriations Act, rather than the pro rata reduction rule prescribed by Title 24 of the Code of Federal Regulations ("C.F.R."). Id. at 536. It awarded damages in excess of $130 million to the group of over 300 public housing authorities that were plaintiffs in those consolidated cases. See id. at 525.

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Currently before the Court in this case is the government's motion to dismiss Plaintiffs' complaint for lack of subject-matter jurisdiction and/or for failure to state a claim. ECF No. 16.1 For the reasons set forth below, the government's motion is DENIED.


I. Statutory and Regulatory Framework

As noted, the complaint in this case presents the same legal claims as those adjudicated in Public Housing. To briefly recapitulate, the underlying legal authority for the federal government's public housing program is the United States Housing Act of 1937 ("the Housing Act"), codified at 42 U.S.C. §§ 1437 et seq. It "exists 'to assist States and political subdivisions of States to remedy the unsafe housing conditions and the acute shortage of decent and safe dwellings for low-income families' and 'to address the shortage of housing affordable to low-income families.'" Pub. Hous. Auths. Dirs. Ass'n, 130 Fed. Cl. at 525 (quoting 42 U.S.C. § 1437(a)(1)). "The federal government does not own, manage, or maintain public housing"; instead, responsibility for such ownership, management, and maintenance is vested in public housing authorities. Id.2

The Housing Act provides that HUD "may make annual contributions to public housing agencies to assist in achieving and maintaining the lower income character of their projects." 42 U.S.C. § 1437c(a)(1). There are two sources of funding for these contributions: (1) the capital fund, which provides funds "to carry out capital and management activities"; and (2) the operating fund, which supplies funding "for the operation and management of public housing." Pub. Hous. Auths. Dirs. Ass'n, 130 Fed. Cl. at 525 (quoting 42 U.S.C. § 1437g(d) & (e)).

This case involves the operating fund. Congress delegated authority to HUD to determine how much assistance it would provide public housing agencies from that fund each fiscal year. Id.; 42 U.S.C. § 1437g(e)(2)(A). HUD exercised its authority by issuing regulations setting forth an operating fund formula. See generally 24 C.F.R. Part 990. The regulations also address how to proceed if Congress fails to appropriate sufficient funds to pay the aggregate formula amount due to all public housing agencies in any particular fiscal year. 24 C.F.R. § 990.210(c). That provision states that "[i]n the event that insufficient funds are available, HUD shall have discretion to revise, on a pro rata basis, the amounts of operating subsidy to be paid to [public housing agencies]." Id.

Under the Housing Act, operating fund subsidies may be used by public housing agencies "for the operation and management of public housing." 42 U.S.C. § 1437g(e)(1). The permissible

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uses of operating subsidies include expenditures for "procedures and systems to maintain and ensure the efficient management and operation of public housing units"; "activities to ensure a program of routine preventative maintenance"; "anticrime and antidrug activities"; "the costs of insurance"; "the energy costs associated with public housing units"; "the costs of administering a public housing work program"; "the costs of repaying, together with rent contributions, debt incurred to finance the rehabilitation and development of public housing units"; "the costs associated with the operation and management of mixed finance projects"; and "the costs of operating computer centers in public housing." Id. The statute also contains some restrictions on the uses to which the operating subsidies may be put, see, e.g., 42 U.S.C. § 1437g(g) (entitled "Limitations on use of funds"), and it specifies sanctions for improper use, including—among other things—the termination or reduction of payments otherwise due under 42 U.S.C. § 1437g, see 42 U.S.C. § 1437d(j)(4).

II. The Annual Contribution Contracts

The Housing Act provides that the Secretary "shall embody the provisions for . . . annual contributions in a contract guaranteeing their payment." 42 U.S.C. § 1437c(a)(1). These ACCs are "contract[s] prescribed by HUD for loans and contributions, which may be in the form of operating subsidy, whereby HUD agrees to provide financial assistance and the PHA agrees to comply with HUD requirements for the development and operation of its public housing projects." 24 C.F.R. § 990.115.

The ACCs incorporate by reference Title 24 of the C.F.R., i.e., HUD's regulations regarding, among other things, the operating fund subsidy. Compl. Ex. 1, at 3, ECF No. 1-1 ("[T]hose regulations promulgated by HUD at Title 24 of the Code of Federal Regulations . . . are hereby incorporated into this ACC by reference as if fully set forth herein."). The ACCs also require that "HUD shall provide annual contributions to the HA in accordance with all applicable statutes, executive orders, regulations, and this ACC." Id. at 2.

III. FY2012 Appropriations

Plaintiffs' claims in this case, like those of the plaintiffs in Public Housing, arise out of Congress's failure to provide sufficient funding for the operating fund formula in 2012 and HUD's corresponding distribution of that insufficient amount. Compl. ¶¶ 66-71. For FY2012, President Obama sought $3,961,850,000 for operating fund subsidies, but included in his budget request "a proviso stating that in determining [PHAs'] . . . calendar year 2012 funding allocations . . . the Secretary shall take into account PHAs' excess operating reserves." Pub. Hous. Auths. Dirs. Ass'n, 130 Fed. Cl. at 527 (quotation omitted) (alteration and omissions in original). As a result, HUD announced that it would adjust the 2012 operating fund subsidies based on each public housing authority's excess operating reserves. Id. Shortly afterwards, Congress enacted an appropriation law adopting the president's proposal. It appropriated $3,961,850,000, "[p]rovided, [t]hat in determining public housing agencies' . . . calendar year 2012 funding allocations . . . the Secretary shall take into account public housing agencies' excess operating fund reserves." Id. at 528 (quoting Pub. L. No. 112-55, 125 Stat. 552, 680 (2011)) (alterations and first omission in original) (emphasis omitted).

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HUD then calculated the operating subsidies for 2012. Based on the formula, the aggregate amount due all public housing authorities was $4,888,046,046. Compl. ¶ 69.3 Congress, therefore, had only made available for distribution to the public housing authorities approximately 80.63% of the full funding amount. Id.4 Rather than using this percentage to prorate each PHA's formula amount, HUD, in accordance with Congress's appropriation, first adjusted its calculations based upon excess operating reserves. Thus, for those public housing authorities with excess operating reserves, HUD "subtracted a portion" of their excess operating reserves from their formula amounts. Id. ¶ 70. As a result, each authority received a varying percentage of its full formula amount depending upon whether it had a certain amount of excess operating reserves. Id. ¶¶ 70, 81-82; see also Pub. Hous. Auths. Dirs. Ass'n, 130 Fed. Cl. at 528 (stating that in 2012 "the reduction of the PHAs' payments to account for the budget shortfall were not made on a pro rata basis" and describing the procedure in detail).

IV. The Public Housing Decision

As stated above, the issues on the merits in the present dispute are nearly identical to those present in Public Housing. In that case, over 300 PHAs and two public housing trade associations alleged that HUD breached the ACCs it entered with the PHAs in 2012 when it "reduced their operating subsidy payments on a non-pro rata basis, in conflict with the Title 24 regulations incorporated in the ACCs." Pub. Hous. Auths. Dirs. Ass'n, 130 Fed. Cl. at 529.

Although it challenged the standing of a small number of the plaintiffs in Public Housing, the government did not dispute this Court's subject-matter jurisdiction over the case as a whole.5 The case proceeded on cross-motions for summary judgment, with the government arguing that HUD's...

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