City of Houston, Tex. v. Department of Housing and Urban Development
| Decision Date | 03 June 1994 |
| Docket Number | No. 92-5491,92-5491 |
| Citation | 24 F.3d 1421 |
| Parties | CITY OF HOUSTON, TEXAS, Appellant, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Appellees. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Appeal from the United States District Court for the District of Columbia (No. 89cv00918).
David L. Rose argued the cause for appellant. With him on the briefs was Otto J. Hetzel.
Robert L. Shapiro, Asst. U.S. Atty., argued the cause for appellees. With him on the brief were Eric H. Holder, Jr., U.S. Atty., and John D. Bates and R. Craig Lawrence, Asst. U.S. Attys.
Before: WALD, EDWARDS and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.
On August 9, 1986, the city of Houston, Texas, was awarded a $21.6 million Community Development Block Grant ("CDBG") for the fiscal year 1986. The award was made by the Department of Housing and Urban Development ("HUD"), which administers the grant program. Approximately four months after it made the grant, HUD notified Houston that it was reducing the amount of its CDBG by $2.6 million, because of the city's failure to meet spending targets. HUD subsequently reallocated the $2.6 million to other CDBG program participants during the succeeding fiscal year. By Act of Congress, the appropriation covering the disputed $2.6 million CDBG funds expired on September 30, 1988.
On April 4, 1989, Houston filed suit in the District Court requesting injunctive and declaratory relief, claiming that HUD could not reduce its CDBG without a hearing and seeking restoration of the funds that were deducted from its fiscal 1986 grant. The District Court granted summary judgment in favor of HUD, ruling that Houston's case was moot because the lapse of the appropriation from which fiscal 1986 CDBG monies were drawn meant that there were no funds available from which HUD could lawfully repay Houston. The trial court thus concluded that, even if the city's claims were found to be meritorious, no relief was available. Houston moved for reconsideration, arguing that HUD had other funds that could be used to restore the $2.6 million deducted from the city's 1986 grant. The District Court denied this motion, again ruling that there were no monies available from which the court could grant relief. Houston then appealed to this court.
It is a well-settled matter of constitutional law that when an appropriation has lapsed or has been fully obligated, federal courts cannot order the expenditure of funds that were covered by that appropriation. Thus, we hold that Houston's claims for injunctive and monetary relief must be dismissed as moot. As for the request for declaratory relief, we find the city's claims unfit for judicial review and therefore dismiss for lack of ripeness.
Houston is a so-called "entitlement city" under the CDBG program, meaning that it receives an annual grant from CDBG funds appropriated each year by Congress. Once a grant to an entitlement city is approved, it is ordinarily provided in the form of a letter of credit, which is increased annually by the amount of the grant. The grantee draws on the letter of credit during the year, and funds not used in one year can be carried over to the next. See generally Kansas City v. HUD, 861 F.2d 739, 740 (D.C.Cir.1988).
In the instant case, HUD penalized Houston because the city allegedly failed to disburse its CDBG funds in timely fashion, and so had a large backlog of grant monies in its letter of credit account. HUD's 1986 "Monitoring Report" found that Houston's credit balance ratio--the ratio of the year-end balance in the city's account to its yearly grant--stood at 2.8, meaning that Houston had almost three years' worth of CDBG monies that had not been allocated to eligible programs. On August 9, 1986, HUD awarded Houston $21,699,000 in CDBG monies for fiscal year 1986, which ran from July 1, 1986 through June 30, 1987. In order to promote timely expenditure of the 1986 CDBG, HUD imposed special conditions on that grant. Houston's 1986 CDBG required the city to meet a set schedule for spending the funds in each quarter; if the city failed to meet this condition, HUD would reduce the grant in the following quarter by the amount which the city fell below the target figure.
By letter dated December 22, 1986, HUD notified Houston that it was reducing the city's 1986 grant by $2,660,486 because the city had failed to meet its first quarter spending target by that amount. HUD "de-obligated" this amount from Houston's letter of credit on December 30, 1986. During fiscal 1987, HUD reallocated the $2.6 million it had recovered from Houston in the previous fiscal year to hundreds of cities across the nation, as is required by section 106 of the Housing and Community Development Act of 1974 ("CDBG Act"), 42 U.S.C. Sec. 5306 (1988 & Supp. IV 1992). By Act of Congress, the 1986 appropriation authorizing HUD to disburse the CDBG funds at issue in this case expired on September 30, 1988. See Pub.L. No. 99-160, 99 Stat. 909, 913 (1985). Houston filed suit in the District Court on April 4, 1989, alleging that HUD's reduction of its CDBG without a hearing violated section 111 of the CDBG Act, 42 U.S.C. Sec. 5311(a) (1988), the Administrative Procedure Act ("APA") and its due process rights under the Fifth Amendment.
CDBG grantees are subject to two monitoring provisions. Section 104(e) of the CDBG Act, 42 U.S.C. Sec. 5304(e) (1988), requires HUD to review each grantee at least annually to determine "whether the grantee has carried out its activities ... in a timely manner, ... and whether the grantee has a continuing capacity to carry out those activities in a timely manner," and permits HUD to make "appropriate adjustments in the amount of the annual grants." 1 Section 111 of the Act, in contrast, provides that after notice and opportunity for hearing, HUD may terminate, reduce, or limit CDBG payments to a grantee which "has failed to comply substantially" with the CDBG program. 2 In Kansas City, this court held that section 111, which provides for a hearing, covers HUD actions purporting to sanction grantees for past substantial noncompliance, while section 104(e), which has no explicit procedural requirements, is intended to ensure that current grants will be spent in compliance with the CDBG program. See Kansas City, 861 F.2d at 742-43. 3 In the instant case, Houston alleges that, because HUD's sanctions related to the city's past failures to disburse its CDBG monies, a hearing was required under section 111. HUD counters that it proceeded under section 104(e), because the conditions it attached to Houston's 1986 CDBG addressed only its rate of expenditure of a current grant.
The District Court granted summary judgment for HUD on mootness grounds, a ruling we review de novo. See, e.g., Nikoi v. Attorney General of United States, 939 F.2d 1065, 1068 (D.C.Cir.1991). Because we agree that this case was mooted by the expiration of the relevant appropriation, we affirm the decision of the trial court. "Federal courts lack jurisdiction to decide moot cases because their constitutional authority extends only to actual cases or controversies." Iron Arrow Honor Soc'y v. Heckler, 464 U.S. 67, 70, 104 S.Ct. 373, 374-375, 78 L.Ed.2d 58 (1983) (per curiam). The instant case is moot because the panel can offer no relief which "can redress [appellant's] asserted grievance," id.--namely, the denial of over $2.6 million in CDBG funds.
Funds appropriated for an agency's use can become unavailable in three circumstances: if the appropriation lapses; if the funds have already been awarded to other recipients; or if Congress rescinds the appropriation. 4 West Va. Ass'n of Community Health Ctrs. v. Heckler, 734 F.2d 1570, 1576 (D.C.Cir.1984) (citation omitted). There is an equitable doctrine, however, that permits a court to award funds based on an appropriation even after the date when the appropriation lapses, so long as "the lawsuit was instituted on or before that date." Id. (emphasis added). This exception was noted in National Association of Regional Councils v. Costle, 564 F.2d 583 (D.C.Cir.1977):
[T]he equity powers of the courts allow them to take action to preserve the status quo of a dispute and protect their ability to decide a case properly before them. In such situations, the courts simply suspend the operation of a lapse provision and extend the term of already existing budget authority. If, however, budget authority has lapsed before suit is brought, there is no underlying congressional authority for the court to preserve. It has vanished, and any order of the court to obligate public money conflicts with the constitutional provision vesting sole power to make such authorization in the Congress. Equity empowers the courts to prevent the termination of budget authority which exists, but if it does not exist, either because it was never provided or because it has terminated, the Constitution prohibits the courts from creating it no matter how compelling the equities.
Id. at 588-89 (footnote omitted). As can be seen from the foregoing quotation, the equitable exception is narrow, and "[i]t is beyond dispute that a federal court cannot order the obligation of funds for which there is no appropriation." Rochester Pure Waters Dist. v. EPA, 960 F.2d 180, 184 (D.C.Cir.1992).
Indeed, even if a plaintiff brings suit before an appropriation lapses, this circuit's case law unequivocally provides that once the relevant funds have been obligated, a court cannot reach them in order to...
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