Greater New Orleans Fair Hous. Action Ctr. v. United States Dep't of Hous. & Urban Dev.

• Decision Date: 08 April 2011
• Docket Number: Nos. 10–5257,10–5269.,s. 10–5257
• Citation: 639 F.3d 1078
• Parties: GREATER NEW ORLEANS FAIR HOUSING ACTION CENTER, et al., Appellantsv.UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT and Robin Keegan, in her Official Capacity as Executive Director of the Louisiana Recovery Authority, Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

639 F.3d 1078

GREATER NEW ORLEANS FAIR HOUSING ACTION CENTER, et al., Appellants

v.UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT and Robin Keegan, in her Official Capacity as Executive Director of the Louisiana Recovery Authority, Appellees.

Nos. 10–5257

10–5269.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 15, 2011.Decided April 8, 2011.

Appeals from the United States District Court for the District of Columbia (No. 1:08–cv–01938).A.J. Krouse argued the cause for appellee/cross appellant Robin Keegan. With him on the briefs were Renee Culotta, Suzanne M. Risey, and Timothy Heffernan.Joseph M. Sellers, argued the cause for appellants/cross appellees. With him on the briefs were Jenny R. Yang, John Payton, Debo P. Adegbile, Renika C. Moore, and Craig Goldblatt.Before: ROGERS and KAVANAUGH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.Opinion for the Court filed by Senior Circuit Judge WILLIAMS.Opinion concurring in part and concurring in the judgment filed by Circuit Judge ROGERS.WILLIAMS, Senior Circuit Judge:

The plaintiffs in this case are two fair housing organizations in New Orleans and five African–American homeowners. They claim that a program to help homeowners rebuild after hurricanes Katrina and Rita has employed a grant formula that violates the antidiscrimination provisions of the Fair Housing Act, particularly 42 U.S.C. § 3604(a). The program is administered by the Office of Community Development (“OCD”) of the State of Louisiana, an entity we treat interchangeably with its predecessor, the Louisiana Recovery Authority (“LRA”). Defendant Robin Keegan is the Executive Director of the OCD. The U.S. Department of Housing and Urban Development (“HUD”) is a defendant in the suit but has taken no part in this appeal and cross-appeal.

Plaintiffs sought preliminary injunctive relief, which the district court initially denied on the ground that it was barred by state sovereign immunity under the Eleventh Amendment. Plaintiffs appealed. While the appeal was pending, the district court granted the plaintiffs' later request for narrower injunctive relief. Defendant Keegan cross-appealed. Because it is plain that there are some potential remedies not running afoul of sovereign immunity, we have jurisdiction to address the substantive merits of plaintiffs' claim (regardless of sovereign immunity's possible applicability to the injunction initially sought). Doing so, we find that the plaintiffs' showing on those merits is too weak to give them the likelihood of success required for a preliminary injunction. Accordingly, we affirm the denial of plaintiffs' initially requested injunction and reverse the grant of their follow-up injunctive claim.¹

In 2005 approximately 123,000 owner occupied homes in Louisiana were destroyed or severely damaged by hurricanes Katrina and Rita. Deferred Appendix (“D.A.”) 47. Using federal funds, Louisiana created the Road Home Homeowner Assistance Program to assist Louisianans displaced by the hurricanes. The program's principal activity has been provision of grants to homeowners who wish to repair or rebuild and reoccupy their damaged homes. As of March 24, 2011, it had given 117,744 Louisiana homeowners almost $8 billion in grants for rebuilding. Office of Community Development, The Homeowner Assistance Program Weekly Situation and Pipeline Report Week 247, 1 (March 29, 2011) (“Weekly Situation and Pipeline Report”), http:// www. road 2 la. org/ Docs/ pipeline/ week 247 pipeline. pdf. The program is supported by three special appropriations of Community Development Block Grants by Congress in 2005, 2006, and 2007. Pub.L. No. 109–148, 119 Stat. 2680, 2779–81 (Dec. 30, 2005); Pub.L. No. 109–234, 120 Stat. 418, 472–73 (June 15, 2006); Pub.L. No. 110–116, 121 Stat. 1295, 1343–44 (Nov. 13, 2007) (“2007 Act”).

The program's grants fall into three categories. Option 1 grants are available to those Louisiana homeowners who plan to repair or rebuild their damaged homes. Homeowners receiving Option 1 grants must agree to a covenant requiring their rebuilt home to be owner-occupied for at least three years (the covenant runs with the house so that any buyer of the house is bound if the grant recipient sells the house). Options 2 and 3 relate to homeowners without plans to rebuild on their original homesites. This case concerns only grants made under Option 1.

OCD has calculated these grants by taking the lesser of the pre-Katrina value of the home and the cost-to-rebuild, subtracting the value of any FEMA or insurance proceeds received by the homeowner, and, if the homeowner carried no home insurance, applying a 30% penalty (i.e., 30% of the lower of value or cost-to-rebuild, minus any FEMA grant). D.A. 110. The resulting total is capped at $150,000. The formula has special provision for houses more than half (but not fully) destroyed and for homeowners who must raise the elevation of their homes in order to comply with new regulations. Homeowners with incomes that are no higher than 80% of the “area median income” may receive an Additional Compensation Grant (“ACG”) to cover any difference between the cost-to-rebuild and the amount of their compensation and elevation grants. ACGs were initially subject to a $50,000 limit, but that was removed before the district court heard plaintiffs' motion for a preliminary injunction. The $150,000 cap applies to any recipient's total grant, including any elevation grant or ACG. The various formulae used in awarding grants have been developed by the LRA and OCD and approved by HUD.

Plaintiffs brought suit against HUD and Keegan on behalf of all African–American homeowners in New Orleans who will have participated in the Road Home program by the first day of trial and had their grant amounts calculated on the basis of pre-storm value of their homes. The parties agreed to defer briefing on class certification until after commencement of discovery, D.A. 38–39, and there has been no ruling on class certification. Plaintiffs alleged that the Option 1 formula violates the Fair Housing Act, 42 U.S.C. §§ 3604(a), 3605(a), 3608(d), (e)(5), and the Housing and Community Development Act of 1974, 42 U.S.C. § 5304(b)(2). Their theory is that the formula's use of pre-Katrina house values as a grant ceiling had a disparate impact on African–American homeowners, who tend to live in New Orleans neighborhoods with lower property values than those in predominately white neighborhoods.

Factually, the disparate impact claim relies primarily on a 2008 study by PolicyLink, using data on the Road Home program provided by the LRA and the Louisiana Housing Finance Agency. Plaintiffs focus on a “resource gap” found by the study, which it defined as the difference between total resources available for rebuilding and the cost of rebuilding. PolicyLink calculated resources for rebuilding as including all grants under the Road Home program, plus money received from FEMA and the homeowner's insurance proceeds. PolicyLink, A Long Way Home: the State of Housing Recovery in Louisiana 2008 (“PolicyLink”), at 39, http:// policylink. info/ threeyearslater/. For rebuilding costs, it used the same formulae that LRA used in calculating grant awards.

The study found that although African–American Option 1 grant recipients received larger average Road Home grants than white recipients, the “resource gap” was $39,082 on average for African–American grant recipients, compared with $30,863 on average for white grant recipients. PolicyLink at 42. The study suggested that much of the “resource gap” was driven by the element of the formula using home values as a ceiling on grants. Among homeowners who were paid under the prong of the formula looking to pre-Katrina home values, the average resource gap was nearly $50,000, compared to about $14,000 for homeowners who were paid under the formula's cost-to-rebuild prong. PolicyLink at 43. The study also noted that “African American households and low-income households had lower pre-storm home values than the average for closed² applicants rebuilding in place” and that “[l]ow-income households and African Americans had less insurance on average than any other demographic group.” PolicyLink at 38. Plaintiffs presented data from the PolicyLink study and the 2000 census showing that houses in predominantly African–American neighborhoods in New Orleans have significantly lower values than houses in white neighborhoods. PolicyLink at 46–51; D.A. 163, 165.

In October 2009 the state of Louisiana (with the consent of HUD) removed the $50,000 ceiling on ACGs for low income homeowners. D.A. 236. As a result homeowners whose income was no higher than 80% of the median became eligible for total grants up to the lesser of the full cost-to-rebuild or $150,000. Because the new formula made low income homeowners eligible for grants up to the cost-to-rebuild, or $150,000, regardless of the pre-Katrina value of their homes, it effectively removed, for low income homeowners, the part of the grant formula that considered homes' pre-Katrina value. In effect, low income homeowners received the relief requested by plaintiffs. As of May 6, 2010, OCD had paid 9,301 grant recipients $326.5 million in additional ACGs. D.A. 193.

In June 2010 plaintiffs requested a temporary restraining order (“TRO”) and preliminary injunction that would enjoin Keegan “from taking any action to obligate, reallocate and/or spend any funds that, as of June 2, 2010, remain available to the LRA's Road Home Homeowner Assistance program, and ... from taking any action to submit any request to the U.S. Department of Housing and Urban Development ... that would result in or cause further obligation, award, and/or disbursement of funds....” D.A. 68. The purpose of this preliminary injunction would have been to preserve a source of funds for the additional grants that plaintiffs (and the class of homeowners they purport to represent) would...