Leclaire Courts Res. Mgmt. v. Chicago Housing Auth., 96 C 4214.

CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
Citation945 F.Supp. 1107
Docket NumberNo. 96 C 4214.,96 C 4214.
Decision Date28 October 1996
945 F.Supp. 1107
No. 96 C 4214.
United States District Court, N.D. Illinois, Eastern Division.
October 28, 1996.

Page 1108

Robert Ronald Tepper, Chicago, IL, for Leclaire Courts Resident Management Corporation.

Timothy Fair, Chicago Transit Authority, Chicago, IL, for Chicago Housing Authority.


NORDBERG, District Judge.

Leclaire Courts Resident Management Corporation ("RMC") brings this suit complaining that the Chicago Housing Authority ("CHA") terminated its contract with RMC to manage the Leclaire Courts Housing Development ("Leclaire Courts") in violation of 42 U.S.C. § 1437r and 42 U.S.C. § 1983. Before the court is CHA's Motion to Dismiss for lack of subject matter jurisdiction and for failure to state a claim.


RMC is an Illinois non-profit corporation. Complaint ¶ 2. From 1987 until the events described herein, RMC provided management services for the LeClaire Courts pursuant to a series of contracts it entered with the CHA, the owner of LeClaire Courts. ¶ 5.

The parties entered into the contract at issue, the Management Agreement ("Agreement"), on March 5, 1996. Under the Agreement, CHA is responsible for providing funds to RMC and RMC is responsible for providing day-to-day management of LeClaire Courts. The Agreement "start[s] on September 1, 1995 ... and shall continue through August 31, 1998, unless terminated pursuant to Sections 7.03 or 7.04 hereof." Agreement § 2.01. Article 7 provided for termination of the Agreement. Under § 7.03, CHA could terminate the Agreement upon twenty-four hour notice if "... in the sole discretion of the CHA, it determines that Development conditions and/or RMC actions or omissions constitute a threat to the health, safety, or welfare of Residents, neighboring residents or CHA employees." Pl. Exh. A ¶ 7.3(C).

In January 1995, RMC hired its first executive director. ¶ 9. After a number of disputes between the executive director and RMC's board, the executive director was discharged in the Spring on 1996. ¶ 9. Before the executive director's discharge, directors of RMC notified CHA of their belief that the executive director was acting improperly. ¶ 10. CHA's Inspector General conducted an investigation, finding certain improprieties generally relating to matters during the tenure of the former executive director. ¶ 10.

On or about June 13, 1996, CHA's executive director requested the resignations of RMC's entire Board of Directors. ¶ 11. After being threatened with criminal prosecution, all but one of the directors purported to resign on June 28, 1996. ¶ 13. On July 8, 1996, the one remaining director reappointed each of the former directors to the Board. ¶ 14.

At some time before the afternoon of July 10, 1996, CHA assumed management responsibilities of LeClaire Court. ¶ 15. The afternoon of July 10, CHA notified RMC that effective immediately it was terminating the Agreement pursuant to § 7.03, ¶ C of the Agreement. Tracking the language of § 7.03. the notice specified that the CHA "has determined that the [RMC] actions and/or omissions constitute a threat to the health, safety, and/or welfare of Residents and/or CHA employees ..." ¶ 18, Pl.Exh. D.

RMC brought this action seeking a declaratory judgment, alleging CHA did not perform the contract in good faith. ¶ 23. RMC alleges federal question jurisdiction for this action pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1343, alleging that CHA's acts were an actionable violation of 42 U.S.C. § 1437r and 42 U.S.C. § 1983.

In this Motion to Dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Civil Rules of Procedure, CHA contends that the Court lacks jurisdiction to hear this case and that RMC fails to state a claim because (1) § 1437r does not imply a private right of action, (2) even if it did, this case does not

Page 1109

fall within that right of action, and (3) this matter is not ripe, Plaintiff not having exhausted its administrative remedies.

Standards for Motions to Dismiss

In ruling on a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the court must accept as true all well-pleaded factual allegations and draw reasonable inferences in favor of the plaintiff. Capitol Leasing Company v. F.D.I.C., 999 F.2d 188 (7th Cir.1993). A party who invokes the jurisdiction of a federal court, must allege all facts necessary to give the court jurisdiction of the subject matter. Stewart v. United States, 199 F.2d 517 (7th Cir.1952). The district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists. Capitol Leasing, 999 F.2d at 191, citing Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir. 1979). A court must dismiss a case without reaching the merits if it concludes that it has no jurisdiction. Shockley v. Jones, 823 F.2d 1068, 1070 n. 1 (7th Cir.1987).

A Rule 12(b)(6) motion tests the legal sufficiency of a complaint. See Adams v. Cavanagh Communities Corp., 847 F.Supp. 1390, 1396 (N.D.Ill.1994). In order to survive a motion to dismiss, a complaint must allege sufficient facts to outline a cause of action. Davis v. Frapolly, 747 F.Supp. 451 (N.D.Ill. 1989). The complaint "must state either direct or inferential allegations concerning all of the material elements necessary for recovery under the relevant legal theory." Carl Sandburg Village Condominium Ass'n No. 1 v. First Condominium Dev. Co., 758 F.2d 203, 207 (7th Cir.1985).

In a 12(b)(6) motion, the Court must accept as true all well pleaded factual allegations in the complaint and view them, along with the reasonable inferences to be drawn from them, in the light most favorable to the plaintiff. Cornfield v. Consolidated High School District No. 230, 991 F.2d 1316, 1324 (7th Cir.1993). However, the Court need not accept as true conclusory legal allegations. Baxter v. Vigo County School Corp., 26 F.3d 728, 730 (7th Cir.1994). When evaluating the legal sufficiency of a plaintiff's factual allegations, courts are held to a strict standard. A motion to dismiss may be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Cushing v. City of Chicago, 3 F.3d 1156, 1159 (7th Cir.1993).


I. Subject Matter Jurisdiction

When a complaint states a claim allegedly "arising under" federal law, invoking jurisdiction under 28 U.S.C. § 1331, a court should not merely accept the plaintiff's word that federal jurisdiction exists. LaSalle National Trust, N.A. v. ECM Motor Co., 76 F.3d 140, 142 (7th Cir.1996). A federal court cannot hear a claim otherwise within federal jurisdiction if the claim is "so attenuated and unsubstantial as to be absolutely devoid of merit." Hagans v. Lavine, 415 U.S. 528, 536, 94 S.Ct. 1372, 1379, 39 L.Ed.2d 577 (1974) (citations omitted). But this test of substantiality is applied in only extreme cases where the claim under federal law is "so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy within the jurisdiction of the District Court..." Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 94 S.Ct. 772, 39 L.Ed.2d 73 (1974).

Despite this generous standard, CHA contends that the Court does not have subject matter jurisdiction over this case. CHA argues that as § 1437r does...

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