Haywood v. Chi. Hous. Auth.
| Decision Date | 28 September 2016 |
| Docket Number | 15 C 8317 |
| Parties | Mary HAYWOOD, Martha Lewis, Annie Stubenfield, A.D. Lindsey, Essie McAllister, and Sandra Walton, on behalf of themselves and all others similarly situated, Plaintiffs, v. CHICAGO HOUSING AUTHORITY, an Illinois municipal corporation, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Matthew J. Piers, Christopher J. Wilmes, Todd Michael Pierce–Ryan, Hughes Socol Piers Resnick & Dym Ltd., Jeremy Patrick Bergstrom, Katherine Elizabeth Walz, Sargent Shriver National Center on Poverty Law, Chicago, IL, for Plaintiffs.
Stepfon Rondell Smith, Erin Ashley Johnson, Jason Theodore Mayer, Erin Anne Walsh, Molly Anne Arranz, Smith Amundsen LLC, Cheryl J. Colston, Chicago Housing Authority, Chicago, IL, for Defendant.
Mary Haywood, Martha Lewis, Annie Stubenfield, A.D. Lindsey, Essie McAllister, and Sandra Walton brought this putative class action against the Chicago Housing Authority ("CHA") under 42 U.S.C. § 1983 and Illinois law. The operative complaint alleges that CHA violated the Brooke Amendment to the United States Housing Act of 1937, 42 U.S.C. § 1401 et seq. , its implementing regulations, and Illinois contract law by charging Plaintiffs monthly rent above the lawful ceiling and by failing to conduct annual reviews and interim adjustments of residents' utility allowances. Doc. 18. CHA has moved to dismiss the suit pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Doc. 27. The motion is: (1) granted as to all claims alleging violations of the regulations; (2) granted as to McAllister's and Walton's Brooke Amendment claims; and (3) denied as to the other four plaintiffs' Brooke Amendment claims and all six plaintiffs' state law contract claims.
In resolving a Rule 12(b)(6) motion or a Rule 12(b)(1) motion asserting a facial challenge to subject matter jurisdiction, the court assumes the truth of the operative complaint's well-pleaded factual allegations, though not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC , 815 F.3d 1082, 1087 (7th Cir. 2016). The court must also consider "documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice," along with additional facts set forth in Plaintiffs' brief opposing dismissal, so long as those additional facts "are consistent with the pleadings." Phillips v. Prudential Ins. Co. of Am. , 714 F.3d 1017, 1020 (7th Cir. 2013) (internal quotation marks omitted); see also Geinosky v. City of Chicago , 675 F.3d 743, 745 n.1 (7th Cir. 2012). The facts are set forth as favorably to Plaintiffs as those materials allow. See Pierce v. Zoetis , 818 F.3d 274, 277 (7th Cir. 2016). In setting forth those facts on a motion to dismiss, the court does not vouch for their accuracy. See Jay E. Hayden Found. v. First Neighbor Bank, N.A. , 610 F.3d 382, 384 (7th Cir. 2010).
CHA is an Illinois municipal corporation and public housing authority ("PHA") created and existing under the Illinois Housing Authorities Act, 310 ILCS 10/1 et seq. Doc. 18 at ¶ 14. CHA operates more than 21,000 public housing units in Chicago that are subsidized by the Department of Housing and Urban Development ("HUD"). Id. at ¶ 47. Pursuant to 42 U.S.C. § 1437c, a PHA may enter into an annual contributions contract ("ACC") with HUD. CHA's ACC entitles it to annual contributions from HUD; in return, CHA and its contractors must comply with all applicable statutes and HUD regulations. Doc. 18 at ¶¶ 66–67. Four plaintiffs— Haywood, Lewis, Stubenfield, and Lindsey—are CHA residents. Id. at ¶¶ 8–11. The two other plaintiffs—McAllister and Walton—are former CHA residents. Id. at ¶¶ 12–13.
Haywood has been a CHA resident for sixteen years. Id. at ¶ 15. Since 1999, CHA has calculated her monthly rent according to this formula:
Rent = (adjusted monthly household income * 0.3)—utility allowance—tenant patrol stipend
Id. at ¶ 16. At the time of Haywood's most recent rent determination, her household's adjusted monthly income was $1,160, her utility allowance was (and since 2007 has been) $24, and her "tenant patrol" stipend, for a service she provides to her building, was $100. Id. at ¶¶ 17–18. Accordingly, her monthly rent is $224. Id. at ¶ 18. Since 1999, in addition to paying monthly rent to CHA, Haywood has been required to pay a third–party utility provider for her electricity. Id. at ¶ 17; Doc. 18–2 at 5.
Lewis has been a CHA resident for decades. Doc. 18 at ¶¶ 9, 21. Since 2008, CHA has calculated her monthly rent according to this formula, which will be called the "Rent Formula":
Rent = (adjusted monthly household income * 0.3)—utility allowance
Id. at ¶ 23 . As Lewis's adjusted monthly household income was $660 at the time of her most recent rent determination, and her utility allowance was (and since 2008 has been) $51, her monthly rent is $147. Id. at ¶¶ 21–22, 24. Since 2008, in addition to paying monthly rent to CHA, Lewis has been required to pay a third-party utility provider for her electricity and cooking gas expenses. Id. at ¶ 22.
Stubenfield has lived in CHA public housing for decades. Id. at ¶ 26. Since 2005, CHA has calculated her monthly rent using the Rent Formula. Id. at ¶ 28. At the time of her most recent rent determination, Stubenfield's adjusted monthly household income was approximately $847, and her utility allowance was (and since 2005 has been) $168, so her monthly rent is $86. Id. at ¶¶ 26–27, 29. Since 2005, in addition to paying rent to CHA, Stubenfield has been required to pay a third-party utility provider for her electricity. Id. at ¶ 27.
Lindsey has lived in CHA public housing since 2010, during which time he has been required to pay a third-party utility provider for electricity in addition to paying monthly rent to CHA. Id. at ¶ 32. Since that date, CHA has calculated his monthly rent using the Rent Formula. Ibid. As Lindsey's adjusted monthly household income was $1,349 at the time of his most recent rent determination, and his utility allowance was (and since 2010 has been) $24, his monthly rent is $381. Id. at ¶¶ 31–32, 34.
McAllister lived in CHA public housing from 1973 until September 2008, and Walton did so from 1971 until September 2009. Id. at ¶¶ 36, 41. Both received a utility allowance and were required to pay their electricity and natural gas expenses to a third-party utility provider in addition to paying monthly rent to CHA. Id. at ¶¶ 37, 42. CHA calculated their monthly rent using the Rent Formula. Id. at ¶¶ 38, 43. The complaint does not specify either of their adjusted monthly household incomes or utility allowances, but it does allege that both paid CHA and their utility providers more than 30 percent of their respective households' adjusted monthly incomes for rent and the reasonable cost of utilities. Id. at ¶¶ 40, 45.
At least biennially, CHA calculates a tenant's rent using the household's adjusted income. Id. at ¶ 60. To calculate adjusted household income, CHA obtains the verified annual income of household members and makes deductions pursuant to HUD regulations. Id. at ¶ 61; see 24 C.F.R. §§ 5.609, 5.611, 960.259(c). Then, under the Rent Formula, CHA calculates monthly rent by subtracting a tenant's utility allowance from 30 percent of the household's adjusted monthly income. Doc. 18 at ¶ 62; Doc. 18–1.
CHA last conducted a utility allowance analysis in 1996. Doc. 18 at ¶¶ 49–50. It revised its utility allowances for electricity and natural gas in 1997, 1998, 2000, 2004, 2005, and 2007. Id. at ¶ 50. Since September 2007, electricity and natural gas costs have increased for Plaintiffs and all putative class members; in several instances, the month-over-month rate increases have exceeded ten percent. Id. at ¶ 51. Despite this, CHA has not increased its utility allowances for public housing residents since 2007. Id. at ¶ 52.
CHA has a standard lease agreement with terms applicable to all CHA residents. Doc. 18–2. Section 1 of the agreement states that a tenant's "rent amount shall be determined by the CHA in compliance with [HUD] regulations and the CHA approved Rent Policy." Doc. 18 at ¶ 69; Doc. 18–2 at 6. The lease further states that if the resident pays a third-party utility provider for utilities, CHA will provide the resident with a monthly utility allowance, and the resident is responsible for making utility payments directly to the utility provider. Doc. 18 at ¶ 70; Doc. 18–2 at 5. The lease then states that the utility allowance "shall be enough to pay for a reasonable use of utilities by an energy conservative household of modest circumstances consistent with the requirements of a safe, sanitary, and healthy living environment." Doc. 18 at ¶ 70; Doc. 18–2 at 5. Section 2 provides that utility allowances are factored into the resident's rent calculation when the resident pays utilities directly to a third-party utility provider. Doc. 18 at ¶ 71; Doc. 18–2 at 7. Section 11 obligates CHA "[t]o comply with the requirements of ... HUD regulations materially affecting health and safety." Doc. 18 at ¶ 73; Doc. 18–2 at 20. At all relevant times, Plaintiffs materially performed their obligations under their CHA leases. Doc. 18 at ¶ 46. Section 17 provides that "[d]isputes arising under" the lease "shall be resolved pursuant to the CHA's Grievance Procedure." Doc. 18–2 at 29 (emphasis omitted).
The operative complaint alleges that CHA charged rent above the ceiling set by the Brooke Amendment, 42 U.S.C. § 1437a(a)(1) (Count I); violated HUD regulations by failing to conduct annual reviews of its utility allowances and failing to provide interim adjustments of utility allowances when the rates on which they were based increased by more than ten percent month-over-month (Counts II–III); and breached its residential leases with Plaintiffs (Count IV). Doc. 18. CHA seeks dismissal of all...
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