Frakes v. Pierce

• Decision Date: 28 February 1983
• Docket Number: No. 81-4247,81-4247
• Citation: 700 F.2d 501
• Parties: Marjorie FRAKES, et al., Plaintiffs-Appellants, v. Samuel R. PIERCE, Jr., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 501

700 F.2d 501

Marjorie FRAKES, et al., Plaintiffs-Appellants, v. Samuel R. PIERCE, Jr., et al., Defendants-Appellees.

No. 81-4247.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 13, 1982.

Decided Feb. 28, 1983.

Mark T. Johnson, Greater Watts Justice Center, Los Angeles, Cal., Roberta Ranstrom, Legal Services of NoCal, Sacramento, Cal., Richard A. Rothschild, Patricia Tenoso, Los Angeles, Cal., Michael Bush, Legal Services of Northern Cal., Chico, Cal., for plaintiffs-appellants.

Howard Scher, Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of California.

Before KASHIWA, ^* WALLACE and ANDERSON, Circuit Judges.

KASHIWA, Circuit Judge:

Plaintiffs-appellants are tenants of federally-financed housing projects throughout California. They appeal from a judgment of the district court that granted summary judgment for defendants-appellees, the Secretary and other officials of the United States Department of Housing and Urban Development ("HUD") and two owners of housing projects. We affirm.

Background

Appellants are tenants in housing projects in California that have mortgages insured and subsidized by the federal government pursuant to either Section 221(d)(3) or Section 236 of the National Housing Act (the "Act"), ¹ 12 U.S.C. Sec. 1715l (d)(3) and 12 U.S.C. Sec. 1715z-1, respectively. Appellants represent, for purposes of their claim for injunctive and declaratory relief, a statewide class of all persons who reside, or have resided since July 1, 1978, in subsidized Section 221(d)(3) and Section 236 projects in California.

On July 1, 1978, Proposition 13, which California voters had passed on June 6, 1978, became effective. It limits taxes on real property to 1% of the full cash value of the property. Proposition 13, thus, substantially reduced the property taxes of all owners of taxable real property, including the owners of Section 221(d)(3) and Section 236 subsidized housing projects. Since property tax is one component of the operating expenses ² of any housing project, operating expenses were correspondingly reduced.

During the period of July 1, 1978, through the filing of this lawsuit on January 29, 1979 and beyond, tenants of subsidized housing were charged rents based on pre-Proposition 13 rent schedules, which did not reflect the reduced operating expenses due to substantially lower property taxes. The rental charges of each housing project, which are based on the operating expenses of that project, must be approved by the Secretary. ³

On February 14, 1979, after the initial complaint was filed, the Secretary announced a rent reevaluation plan to address the effects of Proposition 13 on operating expenses. The Secretary's plan called for the submission by each project owner of, inter alia, (1) the financial statement of his project since the last annual financial statement, (2) post-Proposition 13 tax bills, (3) proposed rent schedules, and (4) evidence of compliance with any requirement that physical improvements be made to the project.

Based on these considerations, some rental charges were increased, some were decreased, and some remained the same. In addition, this review revealed that relatively few projects had surplus cash available at the end of 1978. As a result, HUD did not order project owners to make retroactive rent rebates to tenants.

Proceedings in the District Court

In their complaint and amended complaint, appellants sought retroactive reduction of rental charges and refund of surplus monies (rebates) resulting from Proposition 13 tax savings. In addition, appellants filed motions for a preliminary injunction and for certification of the plaintiff and defendant classes. In April, 1979, the Secretary filed a motion to dismiss the complaint or, alternatively, for summary judgment. On August 31, 1979, the district court (Wilkins, C.J.) granted partial certification of the plaintiff class for injunctive and declaratory relief against the appellees (the Secretary and other HUD officials) but not for restitution (rent rebates). In addition, the district court rejected certification of the project owners as a defendant class. Further, the Secretary's motion for summary judgment was denied on the grounds that HUD had failed, as required, to reevaluate all California project rentals from the effective date of Proposition 13 (i.e., July, 1978), and that defects existed in the regional implementation of HUD's policy.

On October 15, 1979, HUD submitted a report, as requested by the district court, detailing specific procedures in conducting its retroactive rent reevaluation plan. Shortly thereafter, the Secretary renewed his motion for summary judgment. The appellants countered with a motion to hold HUD in contempt for failure to follow the court's order of August 31, 1979. Appellants' motion was denied by the district court in May, 1980.

After several motions for reconsideration of previous rulings and an exhaustive check by HUD to determine whether all Section 221(d)(3) and Section 236 projects affected by Proposition 13 had been reevaluated, the district court (Ramirez, J.) granted the Secretary's motion for summary judgment on the ground that the Secretary's action in approving rental schedules after reevaluation and his decision not to allow retroactive rent rebates constituted agency action committed to agency discretion by law and hence not subject to judicial review.

Appellants now seek review of the district court's refusal to review the Secretary's reevaluation and adjustment of rents. Appellants also seek review of the district court's orders of August 31, 1979, and May 6, 1980, in which the court first, refused to certify the project owners as a defendant class, and second, limited certification of the plaintiff class to injunctive relief only.

Judicial Review

Appellants contend that the Secretary's actions are subject to judicial review. In particular, they contend that the Secretary's rent reevaluation policy was inadequate and in violation of the Act. Appellants cite a trio of Supreme Court decisions, Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970); and Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), for the principle that there is a presumption in favor of judicial review of administrative agency action under the Administrative Procedure Act (the "APA"), 5 U.S.C. Secs. 701-706 (1976). ⁴

To illustrate the application of that principle, the appellants cite Geneva Towers Tenants Organization v. Federated Mortgage Investors, 504 F.2d 483 (9th Cir.1974); Russell v. Landrieu, 621 F.2d 1037 (9th Cir.1980); and Davis v. United States Department of Housing and Urban Development, 627 F.2d 942 (9th Cir.1980). We believe, however, the appellants have misplaced the emphasis of these cases. None of the cases deals with the question of whether federal courts have jurisdiction to review HUD rental determinations. Rather, they deal with the questions of minimal due process requirements of opportunity for comment and notice required for rental increases, the Secretary's foreclosure procedures, and the Secretary's decision to approve block grant assistance for municipalities, respectively.

In general, Section 701 of the APA provides for judicial review of administrative actions unless such review is prohibited by either statute or where agency action is committed to agency discretion by law. 5 U.S.C. Sec. 701(a). See Citizens to Preserve Overton Park v. Volpe, 401 U.S. at 410, 91 S.Ct. at 820. When it appears from the terms of a statute or from its legislative history that Congress intended the ultimate decisionmaking authority in a particular area to be within the administrative agency rather than in the courts, judicial review is foreclosed. See Barlow v. Collins, 397 U.S. at 166-167, 90 S.Ct. at 837-838. See generally Ness Investment Corp. v. United States Department of Agriculture, 512 F.2d 706 (9th Cir.1975).

In Panama Canal Co. v. Grace Line, Inc., 356 U.S. 309, 78 S.Ct. 752, 2 L.Ed.2d 788 (1958), involving a toll-making procedure for the Panama Canal, respondent Grace Line sued to compel petitioner, the Panama Canal Company, to prescribe new tolls for the use of the Canal and to refund tolls which it alleged had been illegally collected. The Court stated:

Section 10 of the Administrative Procedure Act, 60 Stat. 243, 5 U.S.C. Sec. 1009 [predecessor of 5 U.S.C. Sec. 701], excludes from the categories of cases subject to judicial review "agency action" that is "by law committed to agency discretion." We think the initiation of a proceeding for readjustment of the tolls of the Panama Canal is a matter that Congress has left to the discretion of the Panama Canal Co. Petitioner is, as we have seen, an agent or spokesman of the President in these matters. It is "authorized" to prescribe tolls and to change them. Canal Zone Code, Tit. 2, Sec. 411. But the exercise of that authority is far more than the performance of a ministerial act. As we have seen, the present conflict rages over questions that at heart involve problems of statutory construction and cost accounting: whether an operating deficit in the auxiliary or supporting activities is a legitimate cost in maintaining and operating the Canal for purpose of the toll formula. These are matters on which experts may disagree; they involve nice issues of judgment and choice, which require the exercise of informed discretion. [Citations omitted].

Id. at 317, 78 S.Ct. at 757.

Although this court has not previously considered the question of whether HUD's determination of rental charges is reviewable or not, ⁵ other circuit courts have uniformly held that such determination is not reviewable. In the seminal case of Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir.1970),...