Fuerst v. Hous. Auth. of Atlanta

• Decision Date: 22 June 2022
• Docket Number: 21-10285
• Citation: 38 F.4th 860
• Parties: Karen FUERST, Plaintiff-Appellant, v. The HOUSING AUTHORITY OF the CITY OF ATLANTA, GEORGIA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

38 F.4th 860

Karen FUERST, Plaintiff-Appellant,

v.The HOUSING AUTHORITY OF the CITY OF ATLANTA, GEORGIA, Defendant-Appellee.

No. 21-10285

United States Court of Appeals, Eleventh Circuit.

Filed: June 22, 2022

Halsey G. Knapp, Jr., Barclay Vallotton, Krevolin & Horst, LLC, Atlanta, GA, for Plaintiff - Appellant.

Brent L. Wilson, Megan Lee Quinn, John Mason Wymer, Elarbee Thompson Sapp & Wilson, LLP, Atlanta, GA, for Defendant - Appellee.

Before Newsom, Branch, and Brasher, Circuit Judges.

Branch, Circuit Judge:

By its plain text, the National Defense Authorization Act ("NDAA"), 41 U.S.C. § 4701 et seq. , protects employees of federal "contractor[s], subcontractor[s], grantee[s], [and] subgrantee[s] or personal services contractor[s]" from their employers’ retaliation for disclosing information that the employee reasonably believes to be evidence of gross mismanagement of a federal contract or grant, an abuse of authority related to a federal contract or grant, or a violation of a law, rule, or regulation pertaining to a federal contract or grant. 41 U.S.C. § 4712(a)(1).

The NDAA notwithstanding, in 2017, Karen Fuerst—then an attorney employed by the Atlanta Housing Authority ("AHA"), which is a recipient of federal grant funds—was fired after challenging the negotiation tactics of AHA's new CEO, Catherine Buell. Fuerst's complaints filed with the Department of Housing and Urban Development ("HUD") inspector general and the United States District Court for the Northern District of Georgia were both dismissed for failure to state a claim under the NDAA.

On appeal, Fuerst argues that the district court erroneously concluded that § 4712 did not apply to her as an employee of a federal "grantee," and erroneously found that she merely alleged a difference of opinion, not a specific violation of a contract or grant.

We agree with Fuerst that she falls within the class of disclosing persons protected by § 4712 ; the district court erred in concluding otherwise. Regardless, we affirm the district court because Fuerst failed to show that her belief that Buell's actions evinced gross mismanagement was reasonable. Nor did she show that she had a reasonable belief that Buell's actions constituted an abuse of authority or a violation of a law, rule, or regulation. Accordingly, after careful review and with the benefit of oral argument, we affirm.

I. BACKGROUND

A. Factual Background¹

i. The Atlanta Housing Authority

AHA is a corporation organized under Georgia's Housing Authorities Law, O.C.G.A. § 8-3-1, et seq . Its bylaws describe the organization's mission to "provide quality, affordable housing in amenity rich, mixed-income communities for the betterment of the community." According to Fuerst's complaint, AHA is the state's largest housing authority, providing and facilitating affordable housing for nearly 22,000 low-income households. Pursuant to Georgia's Housing Authorities Law, Atlanta's mayor appoints members to AHA's Board of Commissioners. See O.C.G.A. § 8-3-50(a)(1). However, according to Fuerst, HUD provides the majority of AHA's funding and regulates the Authority's activity through conditional grant terms.

Historically, municipalities concentrated affordable housing units in discrete locations, or "housing projects." However, HUD now requires its grant recipients, including AHA, to develop new affordable housing units in "deconcentrated" communities. Hence, AHA currently finances "mixed-income" communities in Atlanta, in which a portion of units contain subsidized rent-reduced apartments for low-and-middle income residents.

But before AHA can provide affordable housing, developers must first agree to build it. Therefore, to incentivize builders, AHA enters into revitalization agreements with them, under which the parties agree to develop the sites of former public housing projects into mixed-use, mixed-income communities. Using money it receives from HUD grants, AHA provides the developers with subordinated loans, covering a portion of the construction costs for low-income units. To obtain additional financing, the developer and AHA both then apply for low-income housing tax credits ("LIHTCs") from the State, which they resell to high-income investors looking to mitigate tax burdens. LIHTCs are governed by the Internal Revenue Code and issued by the Georgia Department of Community Affairs ("GDCA"), which awards LIHTCs through a competitive application process. See 26 U.S.C. § 42.

LIHTCs are necessary to incentivize builders to engage in mixed-income housing development. After a builder constructs the affordable housing units at the site of a former housing project, it may then engage in further market rate unit development; however, constructing additional affordable housing may risk exceeding HUD's cap on the percentage of affordable housing units at any given property. To qualify for LIHTCs, builders must own a qualifying "low-income building" by the end of the first year in which they claim the credits. 26 U.S.C. § 42(g)(3)(a). A taxpayer may elect to use one of three tests to qualify a building for LIHTCs; federal law makes that election "irrevocable."² Id. § 42(g)(1).

In AHA's mixed-income properties, developers rent 40% of the available units at market rates. The remaining 60% of units are split 20-40 into two affordable housing subsets, moderate income and "public housing-assisted" ("PHA") units. Developers receive AHA funding to build both types of affordable units, and, in addition, may apply for LIHTCs, issued by Georgia in accordance with federal tax law. See 26 U.S.C. § 42. Although LIHTCs sufficiently offset the decreased rent paid by moderate income renters to building owners, they alone do not incentivize owners to accept the even lower rate paid by PHA occupants. Thus, using its HUD grant funds, AHA supplements PHA renters’ payments. Consequently, a building owner receives the same rate for PHA and moderate-income units.

Sometime in the late 1990s or early 2000s, AHA entered into a series of revitalization agreements with Integral, a local property developer, which gave Integral the right to develop former housing project sites in phases. Under the agreements, Integral would first build new affordable housing with AHA's assistance, and, afterwards, using private financing, it would complete the project by building market rate units. Ostensibly, AHA gained little by allowing Integral to engage in purely private development. On the other hand, the ability to build market rate units sweetened the pot for Integral, likely increasing its overall enthusiasm for the affordable housing components of the project. Notably, although the initial agreements between AHA and Integral reserved negotiation on the scope of Integral's private projects, they imposed a deadline on the exercise of those development rights to prevent Integral from sitting on the affordable housing projects in perpetuity.

ii. Fuerst joins AHA

In 2010, Karen Fuerst was hired into AHA's general counsel's office, where she spent the next seven years receiving consistently positive feedback and was eventually promoted to Senior Vice President and Deputy General Counsel for Real Estate. By 2016, Fuerst served on AHA's Investment Committee ("IC"), a management body that makes major decisions about the organization's policies and expenditures. According to Fuerst, she also served as "AHA's lead real estate counsel and its lead legal liaison with HUD." Under then-CEO Joy Fitzgerald, Fuerst claims that she was a trusted advisor and routinely consulted on most real-estate and policy matters.

Thus, when AHA agreed to allow Integral to develop the University Homes housing project—including certain "further leverage," or privately financed market rate units—in 2011, Fuerst was the lead attorney involved in the negotiations. By that point, the HUD-mandated, and AHA-subsidized, housing phases of the AHA-Integral revitalization plan for the University Homes site had been developed, the HUD revitalization grant had been fully expended, and the affordable housing portion of the project's units were completed and occupied by low- and middle-income residents. As a result, Integral could develop the remaining market rate units through private financing without constructing any more affordable units.

In January 2016, AHA hired Catherine Buell as its COO and, that September, it announced that she would serve as its next president and CEO starting in 2017. In late 2016, AHA's IC met several times to discuss various closings on Integral developments, which were partially funded with LIHTCs. Fuerst contends that, at these meetings, Buell: (1) "disavowed" the terms of existing agreements between AHA and Integral; (2) disavowed the terms of recent AHA board approvals that Integral had included in its LIHTC applications to the GDCA; and (3) "arbitrarily sought to force Integral to instead agree to more onerous terms by continually delaying requests for the Board approvals," preventing AHA and Integral from closing prior to the date necessary to receive their LIHTCs.³ Although Fuerst's complaint fails to specify these risks clearly, as best we can tell, she believed that Buell's plan jeopardized Integral's LIHTCs because Integral needed to proceed with market rate housing to avoid exceeding the concentration cap which was a part of AHA's and Integral's LIHTC election application. And Fuerst ostensibly feared that if Integral refused to reopen negotiations with AHA, the consequent failure to close on the private development portion of the project would then prevent AHA from receiving, and therefore selling, future LIHTCs, thereby threatening its ability to complete its mission to construct more affordable housing.

According to Fuerst, she "admonish[ed]" the IC regarding the risks that Buell's "proposed actions" posed to AHA's HUD grant and LIHTC funding sources, and, in response, Buell began to freeze her out of real estate negotiations at AHA. At first, Fuerst noticed that she...