Lopez v. Arraras, 79-1010

• Decision Date: 10 October 1979
• Docket Number: No. 79-1010,79-1010
• Citation: 606 F.2d 347
• Parties: Maria Luisa Castro LOPEZ et al., Plaintiffs-Appellants, Benita Ramos Acosta et al., Intervenors, v. Jose E. ARRARAS, etc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 347

606 F.2d 347

Maria Luisa Castro LOPEZ et al., Plaintiffs-Appellants Benita Ramos Acosta et al., Intervenors, v. Jose E. ARRARAS, etc., et al., Defendants-Appellees.

No. 79-1010.

United States Court of Appeals First Circuit.

Argued June 8, 1979.

Decided Oct. 10, 1979.

Maria Dolores Fernos, Hato Rey, P. R., with whom Manuel E. Moraza Choisne, Hato Rey, P. R., and Frances Diaz Medina, Bayamon, P. R., were on brief, for plaintiffs-appellants.

Lorraine Riefkohl de Lopez, Asst. Sol. Gen., Dept. of Justice, San Juan, P. R., with whom Hector A. Colon Cruz, Sol. Gen., San Juan, P. R., was on brief, for defendants-appellees.

BOWNES, Circuit Judge.

This appeal is brought by Maria Castro Lopez, et al., tenants in federally funded low income housing projects in Puerto Rico. In 1974, appellants brought this class action ¹ against Jose E. Arraras, ² the Secretary of the Housing Department of Puerto Rico, Julio Negroni, Executive Director of the Puerto Rico Water Resources Authority, and Pedro Hernandez, Executive Director of the Puerto Rico Aqueducts and Sewers Authority. Appellants alleged that the appellees' failure to comply with the Brooke Amendment to the Housing Act of 1937, 42 U.S.C. § 1437a(1) ³ violated their rights under 42 U.S.C. §§ 1983 and 1985 and the fifth and fourteenth amendments to the United States Constitution, and they sought injunctive and declaratory relief as well as monetary damages.

The facts are relatively straightforward and are not contested. The Brooke Amendment to the Housing Act provided that a public housing agency could not charge a tenant "gross rent" in excess of twenty-five percent of a tenant's income. According to 24 C.F.R. 860.403,

Gross rent means contract rent plus the PHA's (Public Housing Agency) estimate of the costs to the tenant of reasonable quantities of utilities determined in accordance with the PHA's schedule of allowances for such utilities, where such utilities are purchased by the tenant and not included in the contract rent.

Appellants brought this action alleging that appellees failed to revise the utility allowances to conform with the Brooke Amendment and that, as a result of the inaction, their gross rent exceeded the maximum allowed by law. Appellees did not deny the allegations, but answered that they lacked the funds to implement the changes.

The district court dismissed the complaint on the basis that the eleventh amendment barred retroactive relief, relying principally on Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). Appellants argue on appeal that Edelman v. Jordan is distinguishable, and cite Meade v. Hawaii, No. 74-46 (D.Haw. April 15, 1975), as authority for their position that a remedy can be fashioned which would avoid entanglement in the commonwealth's treasury. We do not reach the eleventh amendment arguments because we hold that the case must be remanded for two reasons. First, we have serious doubts concerning the district court's jurisdiction over appellees. Second, we conclude that, if there is jurisdiction, HUD is a necessary party to this suit and ought to be joined so that the case can be properly and clearly resolved.

The procedural history of the case is somewhat opaque. It appears that another defendant was added at some time, the Executive Director of the Housing and Urban Department Corporation of Puerto Rico (Corporacion de Renovacion Urbana y Vivienda de Puerto Rico or CRUV). Although there is nothing in the record showing formal joinder of the director of CRUV as a party, our examination of P.R.Laws Ann. tit. 3 § 441e reveals that the Secretary of the Housing Department, formerly Arraras, oversees CRUV, which might explain CRUV's involvement in the case.

In 1975, appellants, Arraras, and counsel for CRUV ⁴ entered into a stipulation. Arraras and CRUV agreed to revise the utility rate allowance prospectively beginning July 1, 1976, so that it would be in compliance with the requirements of the Brooke Amendment. The parties agreed to submit to the district court the following legal issues.

a. Whether plaintiffs are entitled to retroactive benefits for any period of time comprised between April 24, 1970 and July 1, 1976 in view of defendant's position that (1) a federal court's remedial power, consistent with the Eleventh Amendment, is necessarily limited to prospective injunctive relief and may not include a retroactive award which requires the payment from the state treasury. Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662; and (2) the Commonwealth of Puerto Rico (Sic ) financial inability to implement the revised rates as specified in paragraph (3) of the stipulation.

On July 3, 1977, the district court ordered the parties to submit additional information concerning CRUV's source of funding, the potential effect equitable restitution would have on Puerto Rico's treasury, the possibility that the Federal Department of Housing and Urban Development (HUD) would supply compensation for CRUV's deficits resulting from an adverse judgment, and state administrative and judicial remedies available to appellants. Appellants complied with the court's order ⁵ and appellees responded by filing a motion to dismiss on October 13, 1977, for failure to join HUD, an allegedly indispensable party, under Fed.R.Civ.P. 19(a)(1). On November 18, 1977, appellees filed the information requested by the court, once again asserting that the action should be dismissed, this time on the grounds that recovery was barred by the eleventh amendment.

The district court rejected appellees' argument that HUD was an indispensable party, for in its view, it did not appear that the appellants had a cause of action against HUD and it was unwilling to penalize appellants for appellees' failure to bring a third party action against HUD. The court noted that it was "aware of the fact that plaintiffs were damaged by defendants' failure to put into effect the revised utility schedule as required by the Brooke Amendment, 42 U.S.C. § 1402(1)" but decided that an order compelling payment of retroactive benefits would have a direct effect on Puerto Rico's treasury. This conclusion was based primarily on a letter from HUD's director of the Housing Management Division, which we discuss later. Infra at 352. The court also rejected appellants' argument that Puerto Rico's involvement in the federally financed housing program amounted to a waiver of its sovereign immunity, and for all of these reasons dismissed the case. This appeal followed the denial of appellants' motion for reconsideration.

In its opinion dismissing the action, the district court adverted to the court's jurisdiction in a footnote, stating: "Needless to say, we find no jurisdictional defects in this action. In any event, the same are not susceptible of waiver and could be invoked at any time." The Secretary of the Housing Department in a motion to dismiss filed in 1974, contended that the appellants, as individual lessees, did not present a claim that satisfied the $10,000 jurisdictional requirement of 28 U.S.C. § 1331(a). ⁶ However, the appellees do not argue this on appeal. Nevertheless, we are obligated to examine the question of jurisdiction since the question of subject matter jurisdiction is always open for determination. See Fed.R.Civ.P. 12(h)(3); Mansfield, Coldwater & Lake Michigan Railway v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 28 L.Ed. 462 (1884); C. Wright, Handbook of the Law of Federal Courts 18 (3d ed. 1976). We do not share the district court's confidence that it had subject matter jurisdiction to entertain the instant case as presently framed.

On remand the district court should determine whether or not appellants can meet 28 U.S.C. § 1331(a)'s requirement that "the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs . . .." The standard by which to measure appellants' claims was enunciated in Saint Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 590, 82 L.Ed. 845 (1938).

The rule governing dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. (Citations omitted.)

See Local Division No. 714 v. Greater Portland Transit District, 589 F.2d 1, 9 (1st Cir. 1978); Jimenez Puig v. Avis Rent-A-Car System, 574 F.2d 37, 39 (1st Cir. 1978); 14 Federal Practice & Procedure: Jurisdiction, Wright, Miller & Cooper, § 3702 at 369-73 (1976).

Appellants' amended complaint meets the facial requirements of28 U.S.C. § 1331(a) since the prayer for relief asks that each tenant receive $15,000 "for the damages suffered because of defendants' actions and rents paid in excess from December 22, 1971." Appellants never clearly specified what these "damages" were. Appellants Castro Lopez and Cruz Romero, as well as subsequent intervenors, did enumerate the sums which they owed for electricity and water for a two month period. ⁷ However, these individual sums, when multiplied out over the time involved, would not appear to bring the claims within the $10,000 requirement. At oral argument, counsel for appellants was specifically asked how much money was involved and she responded that, while she could not be exact, the individual sums would not be large and might involve as little as a dollar or so for some of the tenants. It is well established that in a class action, when two or more plaintiffs having separate and distinct claims unite for convenience and economy, each member of the class must satisfy the jurisdictional amount requirement. Zahn v. International Paper Co., 414 U.S. 291, 301, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973); Snyder v. Harris, 394 U.S. 332, 338, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969); Local Division...