Khan v. Bland

Decision Date13 September 2010
Docket NumberNo. 09–1735.,09–1735.
Citation630 F.3d 519
PartiesLatif KHAN, Plaintiff–Appellant,v.Edward BLAND, Housing Authority of Champaign County, et al., Defendants–Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

OPINION TEXT STARTS HERE

Philip A. Summers (submitted), Champaign, IL, for PlaintiffAppellant.James A. Murphy, Kevin D. Yusman, Mahoney, Silverman & Cross, Joliet, IL, for DefendantsAppellees.

Before EASTERBROOK, Chief Judge, and POSNER and TINDER, Circuit Judges.TINDER, Circuit Judge.

Latif Khan is a landlord in Champaign, Illinois, who began renting properties under the Section 8 Housing Choice Voucher Program in 1993 through the Housing Authority of Champaign County (HACC). Khan's relationship with the HACC began to deteriorate in 2005 when Khan evicted a Section 8 tenant from one of his units and Edward Bland, the executive director of HACC, became aware that Khan had entered into a side lease with the tenant for the basement of the unit. Bland believed the side lease was a violation of Khan's Section 8 Housing Assistance Payment (HAP) contract and a violation of U.S. Department of Housing and Urban Development (HUD) regulations. At a meeting with Khan and his attorney, Bland informed Khan that he was going to terminate all of Khan's existing HAP contracts and debar him from doing business with HACC's Section 8 program in the future because of the violation. Bland refused to consider Khan's explanation of the side lease. A subsequent meeting between Bland and Khan's attorney had the same outcome. At the time, Khan had four HAP contracts; HACC terminated two of those contracts, but allowed two to continue. Khan was later informed by a prospective Section 8 tenant that Pam Presley, HACC Section 8 Coordinator, told her that Khan was an “undesired person,” that he was not good to rent from, and that she could not rent from him.

Khan brought suit against Bland, HACC Section 8 Manager Tosha LeShure, HACC, and Secretary of HUD Alphonso Jackson (who is not a party this appeal) for violation of his substantive and procedural due process rights under the Fourteenth Amendment pursuant to 42 U.S.C. § 1983. He contends that DefendantsAppellees Bland and HACC wrongfully terminated his existing HAP contracts and debarred him from the Section 8 program without due process. Although LeShure is a named party on appeal, Khan has not appealed the district court's ruling dismissing her from the lawsuit.

Khan presented evidence of his claims (some of which are not at issue here) to a jury, and at the close of his case, the appellees moved for judgment as a matter of law pursuant to Rule 50(a) of the Federal Rules of Civil Procedure. The district court granted the appellees' motion, finding that Khan had no property right in the renewal of his HAP contracts or future contracts and at most, had a state law breach of contract claim for the termination of his existing contracts. Khan declined the court's invitation to amend his complaint to assert a breach of contract action. Khan appeals, contending that the district court erred in granting judgment as a matter of law.

We affirm. Khan does not have a property right in his expectancy to enter into new contracts under the Section 8 program. He has not pointed to any provision of the HAP contract, federal law, or state law that would entitle him to continued participation in the program, and the relevant regulations state that owners/landlords are not entitled to continued participation. While he may have property rights in his existing HAP contracts and extensions of those contracts, he was afforded all the process that was due by his available post-deprivation remedy of a state law breach of contract action. Because Khan was not denied a present entitlement, the due process clause does not require a pre-deprivation hearing to interpret the terms of the HAP contracts and incorporated federal regulations.

Further, although Khan argues that he has a liberty interest at stake, he has forfeited this argument by failing to raise it below. Even if we assume that Khan preserved this line of argument and accept his contention that Presley's allegedly defamatory statements were directed by Bland, Khan cannot meet the stigma-plus test set forth in Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976), because he has not shown an alteration of his legal status—the “plus” prong of the test. In accordance with this court's holding in Medley v. City of Milwaukee, 969 F.2d 312 (7th Cir.1992), Khan has no liberty interest in participating in the Section 8 program—a government assistance program designed to provide benefits to third party participants.

Finally, Khan cannot make out a substantive due process claim for his property interest in existing contracts. A mere breach of contract does not support a substantive due process claim. Khan cannot show that a fundamental right was implicated by the alleged breach, nor can he show that appellees violated some other substantive constitutional right or that state law remedies were inadequate to redress the alleged violation.

I.

Khan asserted seven counts in his complaint; the only counts at issue in this appeal are Counts I (procedural due process claim against Bland), III (substantive due process claim against Bland), and VI (due process claim against the HACC). More specifically, in Count I, Khan alleged that Bland, as executive director of the HACC, deprived him of valuable property rights, i.e., his contracts with the HACC and his expectancy to continue to contract in the future, without due process of law. In Count III, Khan alleged that Bland debarred him from doing business with the HACC and that Bland's actions were done arbitrarily and capriciously, with malice in retaliation against Khan for evicting a tenant who had violated his lease. In Count VI, Khan alleged that Bland was in a position to make and enforce policies on behalf of the HACC and that his actions in terminating Khan's contracts with the HACC without due process were the actions of HACC.

This court reviews de novo the district court's grant of a motion for judgment as a matter of law. Greene v. Potter, 557 F.3d 765, 767 (7th Cir.2009). Rule 50 authorizes the entry of judgment as a matter of law if “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.” Fed.R.Civ.P. 50(a)(1). “In other words, the question is simply whether the evidence as a whole, when combined with all reasonable inferences permissibly drawn from that evidence, is sufficient to allow a reasonable jury to find in favor of the plaintiff.” Hall v. Forest River, Inc., 536 F.3d 615, 619 (7th Cir.2008).

A. The Section 8 Housing Choice Voucher Program

Before exploring the details of this case, we begin by discussing some general aspects of the federal housing subsidy program. The Section 8 Housing Choice Voucher Program provides rental assistance to low-income families to enable them to participate in the private rental market. This program is administered by HUD. 42 U.S.C. § 1437f( o ); 24 C.F.R. pt. 982. Although funded by the federal government, it is generally administered by state or local government entities known as public housing agencies (PHAs). 24 C.F.R. § 982.1(a). A PHA must comply with HUD regulations and other HUD requirements for the program. 24 C.F.R. § 982.52(a). Federal regulations require PHAs to adopt written administrative plans that establish local policies for administration of the program in accordance with HUD requirements. 24 C.F.R. § 982.54.

The HACC is the local PHA that administers the Section 8 program for Champaign County, Illinois. The HACC Board of Commissioners establishes the policies under which the HACC conducts business. The principal staff member of the HACC is Executive Director Edward Bland. Bland reports to the Board and is responsible for carrying out HACC policies and managing its day-to-day operations. Bland can draft written policies for HACC, but he must take them before the Board for approval. The HACC's administrative plan and local policies are not part of the record in this case.

Eligibility for the Section 8 housing voucher is determined by income. 24 C.F.R. § 982.201. Qualified participants pay a percentage of their income toward rent and utilities and receive subsidies for the balance of the rental payment. 42 U.S.C. § 1437f. The participant's portion of the rent cannot exceed forty percent of his or her monthly adjusted income. 24 C.F.R. § 982.305(a). The subsidized portion of the rent is paid by the PHA to the rental property owner (the “person ... with the legal right to lease.... a unit to a participant” under the program, 24 C.F.R. § 982.4) pursuant to an HAP contract. Once a PHA determines that a participant is eligible and that there is available space in the program, the PHA issues the participant a voucher and the participant can search for housing. 24 C.F.R. §§ 982.202, 982.302.

If a property owner agrees to lease a unit to a tenant under the program, he must enter into an HAP contract with the PHA. The HAP contract is prescribed by HUD and specifies the maximum monthly rent an owner may charge. 42 U.S.C. § 1437f(c)(1). Before the PHA enters into an HAP contract, the PHA must determine that the cost of the unit is reasonable and meets HUD's prescribed housing quality standards (HQS). 42 U.S.C. § 1437f( o )(8); 24 C.F.R. § 982.305(a); 24 C.F.R. § 982.401. The HAP contract provides that it “shall be interpreted and implemented in accordance with HUD requirements, including the HUD program regulations at 24 Code of Federal Regulations Part 982.” HUD–52641, Part B (3/2000), ¶ 16(b).

The Section 8 participant enters into a separate lease with the owner that must meet certain requirements pursuant to 42 U.S.C. § 1437f( o )(7). For example, the lease must include the required tenancy addendum. 24 C.F.R. § 982.305(a). The housing must also be inspected...

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