Inclusive Cmtys. Project, Inc. v. U.S. Dep't of Treasury

• Decision Date: 04 August 2015
• Docket Number: Civil Action No. 3:14-CV-3013-D
• Parties: THE INCLUSIVE COMMUNITIES PROJECT, INC., Plaintiff, v. THE UNITED STATES DEPARTMENT OF TREASURY, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

THE INCLUSIVE COMMUNITIES PROJECT, INC., Plaintiff, v. THE UNITED STATES DEPARTMENT OF TREASURY, et al., Defendants.

Civil Action No. 3:14-CV-3013-D

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

August 4, 2015

MEMORANDUM OPINION AND ORDER

Plaintiff The Inclusive Communities Project, Inc. ("ICP") brings this action against defendants U.S. Department of the Treasury ("Treasury") and Office of the Comptroller of the Currency ("OCC"), alleging claims under 42 U.S.C. § 3608(d), 42 U.S.C. § 3604(a), 42 U.S.C. § 1982, and the Fifth Amendment, essentially contending that defendants' administration of the Low Income Housing Tax Credit ("LIHTC") program created under the Tax Reform Act of 1986 is perpetuating racial segregation in LIHTC units in the city of Dallas and relegating minority families to unequal conditions of slum, blight, and distress. Defendants move to dismiss, contending that ICP lacks Article III standing, that ICP's § 3608 claim is barred by sovereign immunity and otherwise unreviewable, and that some of ICP's claims fail on the merits. For the reasons explained, the court grants the motion in part and denies it in part and grants ICP leave to replead.

I

The court will briefly recount the background facts and procedural history given the parties' familiarity with the record and the limited scope of this memorandum opinion and order.¹

42 U.S.C. § 3608(d) provides:

All executive departments and agencies shall administer their programs and activities relating to housing and urban development (including any Federal agency having regulatory or supervisory authority over financial institutions) in a manner affirmatively to further the purposes of this subchapter and shall cooperate with the Secretary to further such purposes.

42 U.S.C. § 3604(a) provides, in pertinent part, that

it shall be unlawful . . . [t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

Under the LIHTC program, developers who construct or rehabilitate qualified low-income housing projects can obtain tax credits. According to ICP's complaint, Treasury is the federal agency charged with administering the LIHTC program. Treasury, through the Internal Revenue Service ("IRS"), issues rules and other guidance governing taxpayers' entitlement to LIHTCs, and the IRS denies, or requires recapture of, credits if taxpayers are shown not to be entitled to them.

ICP alleges that OCC is an independent bureau of Treasury that serves as the primary federal regulator of national banks and the public welfare investment ("PWI") authority established in 12 U.S.C. § 24 (Eleventh). National banks are authorized to make investments in affordable housing because, under OCC regulations, projects that qualify for LIHTCs are acceptable PWIs. OCC is required to approve all national bank investments in LIHTC units by finding that the investment in question is designed primarily to promote the public welfare.

ICP alleges that defendants are not administering their programs and activities relating to housing in a manner affirmatively to further fair housing and are in fact administering the LIHTC program in a manner that perpetuates racial segregation and unequal conditions in affordable housing in the city of Dallas. In particular, they allege thatnational banks are a substantial source of funding for LIHTC units in the Dallas area; that OCC has approved all of the national bank or related national banking entities' investments and related involvement in Dallas area LIHTC units as PWIs; that OCC has approved such investments in racially segregated minority areas marked by slum, blight, and distress; that defendants' actions approving such investments in racially segregated minority locations subject to slum, blight, and distress steer LIHTC units into those areas, making such units unavailable in non-minority-concentrated areas without slum, blight, and distress; that there would be more LIHTC units available outside such areas for ICP's clients and other housing voucher participants if defendants did not continue to approve national bank or related national banking entities' investments and related involvement in LIHTC units in racially segregated minority locations subject to slum, blight, and distress; and that the continued application of policies by Treasury and OCC for the regulation of the LIHTC program and national bank or related national banking entities' investments and related involvement directly affects the disproportionate distribution of those units by approving the use of LIHTCs for units and locations that perpetuate racial segregation in areas marked by slum, blight, and distress, thereby injuring ICP and its clients.

Defendants move to dismiss this action, contending that it is barred by sovereign immunity, that ICP lacks standing, and that ICP has failed in certain respects to state a claim on which relief can be granted. ICP opposes the motion. The court has heard oral argument.

II

Treasury and OCC raise standing as their final argument, but the court will address it first.

A

Treasury and OCC maintain that ICP lacks Article III standing. To establish Article III standing, ICP must show that it has "suffered 'injury in fact,' that the injury is 'fairly traceable' to the actions of the defendant, and that the injury will likely be redressed by a favorable decision." Bennett v. Spear, 520 U.S. 154, 162 (1997) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61(1992)). Because defendants' motion to dismiss is not supported by evidence, the court must decide the jurisdictional question based on the complaint alone, and it must presume that the allegations of the complaint are true. See, e.g., Sullo & Bobbitt, PLLC v. Abbott, 2012 WL 2796794, at *4 (N.D. Tex. July 10, 2012) (Fitzwater, C.J.), aff'd, 536 Fed. Appx. 473 (5th Cir. 2013). The court cannot dismiss the complaint if the allegations are sufficient. See Hunter v. Branch Banking & Trust Co., 2013 WL 607151, at *2 (N.D. Tex. Feb. 19, 2013) (Fitzwater, C.J.) (citing Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. May 1981)).

B

Although Treasury and OCC do not concede that ICP has suffered injury in fact, they do not specifically challenge this element. See Ds. Mem. 21-22. The court holds that ICP's complaint adequately alleges the element of injury in fact. See Compl. ¶ 11 (alleging thatwhen sufficient numbers of LIHTC units are not located in low poverty, non-minority concentrated areas, ICP must rely on private market landlords to provide housing, which increases the ICP resources needed to assist clients in obtaining affordable units in non-minority concentrated areas), and ¶ 102 (alleging that defendants' actions have injured ICP).

ICP has also adequately pleaded that its injuries are fairly traceable to defendants' actions. As ICP's counsel explained at oral argument, ICP relies on the assertion that for a national bank to own a LIHTC unit and take a tax credit, OCC and Treasury must approve the specific investment. See Tr. Oral Arg. 28 ("Everybody makes all the decisions and it comes down to OCC and Treasury, are they going to let the national bank own it and take the tax credits. That is nobody else's decision but theirs. If they say no, the tax credits don't get awarded for that project and the bank doesn't get to own it."). This theory is pleaded in ICP's complaint. See, e.g., Compl. ¶¶ 16, 59-60, 101, and 102. In particular, ICP alleges:

Defendant Treasury's and Defendant OCC's continued application of policies for the regulation of the LIHTC program and national bank or related national banking entities investments and related involvement including ownership of LIHTC units directly affects the disproportionate distribution of those units by approving the use of LIHTC for units in locations that perpetuate racial segregation in areas marked by slum, blight, and distress. But for the defendants' actions, there is at least a reasonable probability that there would be a substantial increase in LIHTC units outside of these areas. Defendants' actions injure ICP and ICP's clients.

Id. ¶ 102. See also id. ¶¶ 103-131 (pleading examples of projects that defendants approved and that ICP alleges are "[i]nstances of the Defendants' continued exercise of theirsupervisory and regulatory authority to approve continued investment in racially segregated minority locations marked by slum, blight, and distress." (bold font omitted)).

"[T]he fairly traceable element of standing doctrine imposes a causation standard that is lower than the tort standard of proximate causation." TF-Harbor, LLC v. City of Rockwall, Tex., 18 F.Supp.3d 810, 820 (N.D. Tex. 2014) (Fitzwater, C.J.) (citing League of United Latin Am. Citizens, Dist. 19 v. City of Boerne, 659 F.3d 421, 431 (5th Cir. 2011)), aff'd, 592 Fed. Appx. 323 (5th Cir. 2015); see also, e.g., Rothstein v. UBS AG, 708 F.3d 82, 91-92 (2d Cir. 2013) (collecting cases and discussing difference between "fairly traceable" standard and proximate causation). "[T]he fairly traceable element does not require that the defendant's challenged action be the last act in the chain of events leading to the plaintiff's injury. TF-Harbor, 18 F.Supp.3d at 820 (citing Bennett, 520 U.S. at 168-69). The court holds that ICP has adequately pleaded this element of Article III standing.

Finally, ICP has adequately pleaded that its injuries will likely be redressed by a favorable decision.

Defendants' contention that ICP cannot satisfy this element appears to rest primarily on the premise that the Administrative Procedure Act ("APA") does not permit the court to enjoin defendants to take any of the very specific measures that ICP requests in its complaint. See Ds. Mem. 24 ("[T]he APA does not permit the Court to enjoin Defendants to take any...