Holbrook v. Pitt, 82-3064

• Decision Date: 19 November 1984
• Docket Number: No. 82-3064,82-3064
• Citation: 748 F.2d 1168
• Parties: Doris HOLBROOK, Plaintiff-Appellee, v. Henry C. PITT, Defendant and Third-Party Plaintiff v. SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Third- Party Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1168

748 F.2d 1168

Doris HOLBROOK, Plaintiff-Appellee, v. Henry C. PITT, Defendant and Third-Party Plaintiff v. SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT, Third- Party Defendant-Appellant.

No. 82-3064.

United States Court of Appeals Seventh Circuit.

Argued May 22, 1984.

Decided Nov. 19, 1984.

James A. Gramling, Jr., Leg. Action of Wis., Inc., Milwaukee, Wis., for plaintiff-appellee.

Nicholas Zeppos, Dept. of Justice, Civ. Div., Washington, D.C., for third-party defendant-appellant.

Before BAUER and FLAUM, Circuit Judges, and WYATT, Senior District Judge. ^*

WYATT, Senior District Judge.

The Secretary, United States Department of Housing and Urban Development ("HUD"), the third-party defendant herein, appeals from an order of the District Court, filed October 21, 1982, granting a motion by plaintiff Doris Holbrook for an order under 28 U.S.C. Sec. 2412 and the "common fund doctrine" awarding attorneys' fees. The order awarded attorneys' fees of $30,000 and directed that this allowance "be assessed against absent class members". This Court has jurisdiction of the appeal under 28 U.S.C. Sec. 1291.

The order below and the present appeal came about by reason of a proceeding in the District Court which followed the decision of this Court, made in this same action on March 2, 1981. Holbrook v. Pitt, 643 F.2d 1261 (7th Cir.).

We now reverse the order from which this appeal is taken.

1.

This litigation grew out of Section 8 of the United States Housing Act of 1937, as amended by Section 201(a) of the Housing and Community Development Act of 1974, codified in part as 42 U.S.C. Sec. 1437f and usually referred to as "Section 8". This legislation is designed to help lower-income families to secure adequate housing; Section 8 provides a program of housing assistance payments by HUD under contracts with housing project owners on behalf of eligible lower-income tenants. "Rental assistance payments" is sometimes used in place of housing assistance payments. The two terms are interchangeable and refer to the described payments by HUD.

The Section 8 statute and the Regulations under it provide for the housing assistance payments to be made by HUD to the owner of the dwelling unit occupied by an eligible tenant, and not to the tenant. 42 U.S.C. Sec. 1437f(b)(1). In the Regulations, under the heading "Housing Assistance Payments to Owners", is this provision: "Housing Assistance Payments shall be paid to Owners for units under lease by Eligible Families...." 24 C.F.R. Sec. 886.109(a); (emphasis supplied). The object is that the owner of the project will receive from HUD the housing assistance payment (a rent subsidy) and will receive from the eligible tenant the difference between the agreed rent and the Section 8 subsidy. As this Court said on the earlier appeal (643 F.2d at 1268-69; emphasis supplied):

Upon the completion of certification of eligible families by the owner, HUD makes housing assistance payments to owners on behalf of tenants in accordance with the provisions of the contract.

Plaintiff Holbrook was a tenant in Main Street Gardens, a housing development in Milwaukee owned by defendant Pitt. On June 10, 1976, HUD and Pitt made a contract under Section 8 by which HUD agreed to make housing assistance payments to Pitt, beginning in June 1976, on behalf of eligible tenants of Main Street Gardens; Holbrook was one of these. Pitt, the owner, did not mail promptly to such eligible tenants the necessary Section 8 forms; these were not mailed by Pitt until November 16, 1976. Thus it was that Holbrook and others were not certified to HUD by Pitt until late November 1976. Between June and November 1976, no housing assistance payments were made by HUD to Pitt and for these months, therefore, Holbrook paid the full, total rent for her housing.

2.

This action was commenced by plaintiff Holbrook in July 1977 as a small claims action for $660.18 in the Milwaukee County Court. The amount claimed was the amount of rental assistance payments which the owner (Pitt) failed to receive from HUD from June through November 1976, because Pitt had delayed certification to HUD in this period. Holbrook had paid the entire rent for this period and sought reimbursement from Pitt for the amount of the rent subsidy which HUD had failed to pay. Pitt filed in the action a third-party complaint against HUD for failure of HUD to inform Pitt of his obligations under Section 8. HUD then removed the action on February 17, 1978, to the United States District Court for the Eastern District of Wisconsin.

3.

After the action had been removed to the District Court, Holbrook amended her complaint. The original complaint against Pitt was redesignated Count I. Two new counts, II and III, against HUD were added under Fed.R.Civ.P. 23(a) and (b)(2) on behalf of classes consisting of all families in Wisconsin who resided or who will reside in housing units when Section 8 contracts were or will be executed between HUD and the owner of those housing units but who have not received or will not receive the benefits of housing assistance payments as of the effective date of the Section 8 contracts. The effort was to secure for the class all rental assistance payments retroactive to the effective date of the Section 8 contracts. The theory of Count II was that the Section 8 contracts were for the benefit of the class members as third-party beneficiaries of those contracts. The theory of Count III was that the procedures of HUD in respect of housing assistance payments in the period between the execution of Section 8 contracts and the commencement of housing assistance payments was a violation of the rights of class members to due process of law.

By order filed November 6, 1978, Counts II and III were determined by the District Court to be maintainable as a class action. Fed.R.Civ.P. 23(c)(1). At the same time a decision was filed by the District Court permitting plaintiff Holbrook to represent a class of plaintiffs with respect to Counts II and III.

On stipulated facts, plaintiff Holbrook and HUD filed cross motions for summary judgment on July 30 and August 1, 1979 respectively.

Pitt then certified Holbrook to HUD as eligible for retroactive rental assistance payments, HUD made the amount of these payments available to Pitt, and Pitt tendered the amount to Holbrook, by whom it was accepted. For all practical purposes, Pitt and Count I disappeared from the action at this point.

On October 31, 1979, the District Court filed an opinion, reported at 479 F.Supp. 990, granting the motion of HUD for summary judgment dismissing the action and denying the motion of plaintiff for summary judgment. Count I was dismissed as moot, the individual claim of Holbrook having been paid. The class claims in Counts II and III were dismissed on the ground that the tenants had no valid claim to retroactive housing assistance payments.

There was then an appeal by plaintiff to this Court.

On March 2, 1981, this Court filed its opinion (written by Judge Cudahy) reversing the judgment of the District Court. 643 F.2d 1261. The theory of Count II was sustained and it was held that the class could recover retroactive housing assistance payments as third-party beneficiaries of the Section 8 contracts between HUD and the housing development owners. The theory of Count III was sustained; it was held that the class members were entitled to retroactive housing assistance payments and to due process of law in respect of procedural protections for that entitlement; on remand, the District Court was directed to "determine the precise contours of the requirements of procedural due process...." (643 F.2d at 1281).

This action dealt with retroactive Section 8 housing assistance payments--that is, monthly payments due from the date of the Section 8 contract between project owner and HUD and the commencement of actual payments by HUD to the owner for eligible tenants. After the commencement of these payments to the owner by HUD, the amounts payable by the tenants for rent were reduced by the amount of the HUD rent subsidy. But there was a period after the date of the Section 8 contract when HUD (because of delayed certification by the owner) had not made these subsidy payments and the tenants had been obliged to pay the full rent. This Court ruled that the subsidy payments should be made by HUD from the date of the Section 8 contract. Since, as has been seen, these payments must be made by HUD to the owner and since the owner had already received the full rent from the tenants, there had necessarily to be a reimbursement to the tenants for the excess rent paid by them during the interim period after the date of the Section 8 contract.

4.

After reversal and remand, plaintiff Holbrook, as class representative, and HUD made a stipulation of settlement of the action. On April 14, 1982, these parties filed a joint motion for approval by the Court of the stipulation of settlement and on April 29, 1982, the District Court filed an order approving it and dismissing the action with prejudice. So far as appears in the record, no "notice of the proposed dismissal or compromise" (Fed.R.Civ.P. 23(e)) was given to members of the class. After the stipulation of settlement had been approved by the District Court, HUD gave notice to class members of the terms of settlement.

In summary, the stipulation of settlement provides that HUD will (1) obtain from the project owners the names and addresses of all tenants eligible for retroactive housing assistance payments and all information necessary to calculate the amounts due to each tenant under the decision of this Court; (2) send by mail a notice in specified form to each eligible tenant "that HUD will pay retroactive housing assistance payments to the project owner on behalf of the tenant"; (3) publish on two days in a specified Wisconsin newspaper the same notice; (4) provide retroactive housing assistance payments to...