Inclusive Cmtys. Project, Inc. v. U.S. Dep't of Treasury
| Decision Date | 28 October 2016 |
| 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 |
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 under Fed. R. Civ. P. 12(b)(1) and 12(b)(6) to dismiss ICP's first amended complaint ("amended complaint"). For the reasons explained, the court grants the motion as to ICP's disparate impact claim under § 3604(a) and otherwise denies the motion.
Because this case is the subject of a prior memorandum opinion and order, see Inclusive Communities Project, Inc. v. United States Department of Treasury, 2015 WL 4629635, at *1 (N.D. Tex. Aug. 4, 2015) (Fitzwater, J.) ("ICP-Treasury I"), the court will recount only the background facts and procedural history necessary to understand the present decision.1
The Tax Reform Act of 1986 established the LIHTC program to provide tax credit subsidies for the development and ownership of affordable rental housing. 26 U.S.C. § 42. Generally, the statute offers tax credits as incentives to developers who construct or rehabilitate "qualified low-income housing project[s]." 26 U.S.C. § 42(g)(1). According to ICP's amended complaint, Treasury is the federal agency charged with administering and regulating the LIHTC program. It does so by, inter alia, regulating the federally-imposedconditions and requirements governing the allocation of LIHTCs by state and local housing credit agencies ("HCAs") and jointly administering the LIHTC program with those HCAs. Treasury has not promulgated any regulation that prohibits LIHTCs from being used for units in racially segregated minority areas.
OCC is an independent bureau of Treasury. ICP alleges that OCC is responsible for approving national banks' investments in LIHTC projects under the public welfare investment ("PWI") authority established in 12 U.S.C. § 24 (Eleventh).2 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 is a non-profit organization that seeks racial and socioeconomic integration in the Dallas metropolitan area. In particular, ICP assists low-income, predominately African-American families who are eligible for the Dallas Housing Authority's Section 8 Housing Choice Voucher program in finding affordable housing in predominately non-minority concentrated areas free from the adverse effects of slum, blight, and distress.
ICP was the plaintiff in a lawsuit that sought relief from the Texas Department ofHousing and Community Affairs ("TDHCA") for allegedly disproportionately allocating LIHTCs to developers proposing LIHTC units in non-Caucasian areas, thus perpetuating racial segregation in the location of LIHTC units in the Dallas Area. See, e.g., Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 860 F.Supp.2d 312 (N.D. Tex. 2012) (Fitzwater, C.J.), rev'd, 747 F.3d 275 (5th Cir. 2014), aff'd and , ___ U.S. ___, 135 S.Ct. 2507 (2015). That lawsuit has been dismissed. See Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 2016 WL 4494322, at *1 (N.D. Tex. Aug. 26, 2016) (Fitzwater, J.) ("ICP VII").
ICP now sues Treasury and OCC based on this same allegedly disproportionate allocation of LIHTCs in the city of Dallas, seeking to hold Treasury and OCC liable for their roles in "knowingly, consistently, and repeatedly allow[ing] and approv[ing] investments in LIHTC units that perpetuate racial segregation and unequal conditions." Am. Compl. ¶ 1. ICP asserts that defendants' actions in regulating the LIHTC program and approving national bank investments in LIHTC units located in racially segregated minority areas violate 42 U.S.C. § 3608(d), 42 U.S.C. § 3604(a), 42 U.S.C. § 1982, and the Fifth Amendment.
In ICP-Treasury I the court granted in part and denied in part defendants' motion to dismiss that was addressed to ICP's complaint. The court held that ICP had adequately pleaded standing; that ICP's claim under § 3608 was not subject to dismissal based on sovereign immunity or on the merits3; that ICP had failed to plead a plausible discriminatorypurpose claim under § 3604; and that ICP had failed to state a plausible claim under 42 U.S.C. § 1982 or the equal protection component of the Fifth Amendment. ICP-Treasury I, 2015 WL 4629635, at *3-5. The court declined to dismiss ICP's § 3604(a)-based disparate impact claim because the parties had not briefed the impact of the Supreme Court's decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., ___ U.S. ___, 135 S.Ct. 2507 (2015) ("ICP VI"), which was decided after defendants filed their briefs and the court heard oral argument on defendants' motion to dismiss. ICP-Treasury I, 2015 WL 4629635, at *5. The court granted ICP leave to amend, and ICP has filed an amended complaint.
Defendants now move to dismiss ICP's amended complaint based on sovereign immunity and the merits. ICP opposes the motion.
Before turning to the grounds of defendants' motion to dismiss, the court will briefly set out the pertinent standards that govern whether dismissal should be granted under Rule 12(b)(1) or 12(b)(6).
"Federal courts are courts of limited jurisdiction, and absent jurisdiction conferred by statute, lack the power to adjudicate claims." Stockman v. Fed. Election Comm'n, 138 F.3d 144, 151 (5th Cir. 1998). A Rule 12(b)(1) motion can mount either a facial or factual challenge. See, e.g., 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)). When a party makes a Rule 12(b)(1) motion without including evidence,the challenge to subject matter jurisdiction is facial. Id. The court assesses a facial challenge as it does a Rule 12(b)(6) motion in that it Id. (citation omitted) (citing Paterson, 644 F.2d at 523). Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) (citations omitted).
In deciding a Rule 12(b)(6) motion, the court evaluates the sufficiency of the plaintiff's amended complaint "by accepting all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Bramlett v. Med. Protective Co. of Fort Wayne, Ind., 855 F.Supp.2d 615, 618 (N.D. Tex. 2012) (Fitzwater, C.J.) (quoting In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)) (internal quotation marks and brackets omitted). To survive a motion to dismiss under Rule 12(b)(6), the plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556); see also Twombly, 550 U.S. at 555 (). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'shown'—'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting Rule 8(a)(2)) (brackets omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678. Furthermore, under Rule 8(a)(2), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Although "the pleading standard Rule 8 announces does not require 'detailed factual allegations,'" it demands more than "'labels and conclusions.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). "[A] formulaic recitation of the elements of a cause of action will not do." Id. (quoting Twombly, 550 U.S. at 555).
Defendants move to dismiss ICP's claim under 42 U.S.C. § 3608(d), contending that the claim is barred by sovereign immunity and on the merits. Section 3608(d) provides:
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