McDowell v. Philadelphia Housing Authority (Pha)

Decision Date13 September 2005
Docket NumberNo. 04-2609.,04-2609.
Citation423 F.3d 233
PartiesJackie MCDOWELL, et al. v. PHILADELPHIA HOUSING AUTHORITY (PHA); John White; Barry Miller Jackie McDowell and the certified class whom she represents, Appellant.
CourtU.S. Court of Appeals — Third Circuit

Paul A. Brooks (Argued), George Gould, Community Legal Services, Inc., Philadelphia, Pennsylvania, for Appellants.

Alan C. Kessler, Abbe F. Fletman (Argued), Stephanie L. Kosta, Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania, for Appellees.

Before SCIRICA, Chief Judge, ALITO and GARTH, Circuit Judges.

OPINION OF THE COURT

ALITO, Circuit Judge.

This case requires us to construe a consent decree. The appellants, a class of tenants living in Philadelphia public housing, moved the District Court to enforce the decree and to cite the Philadelphia Housing Authority and two of its employees (together, the "PHA") for civil contempt. The tenants alleged that the PHA had violated the decree by failing to factor rising gas rates into allowances they were entitled to receive for their gas bills. The District Court denied the motion initially and on reconsideration, concluding that the tenants could not show any actual provable injury as a result of the PHA's violations. It reasoned that the PHA could offset its arrears by retroactively reducing the tenants' allowances in light of evidence that tenant gas consumption during the period of the violations had been overstated.

We disagree with this reasoning. The plain text of the decree and applicable federal regulations do not permit the PHA to revise the tenants' allowances retroactively to correct for historically overstated consumption. The tenants were entitled to recover in the form of sanctions the difference between the allowances they received and the allowances they should have received based on the consumption factor then in effect. The District Court erred in calculating their loss based on the PHA's revised figures, and its order denying their motion is vacated.

I.

This case has its genesis in an April 1997 lawsuit filed against the PHA by Jackie McDowell, a tenant in Philadelphia's public housing system. The suit was brought in federal court pursuant to 42 U.S.C. § 1983. McDowell's complaint alleged that the PHA had deprived her of her federal rights by failing to factor rising gas rates into the gas allowances she was entitled to receive under the United States Housing Act of 1937, 42 U.S.C. § 1437 et seq. McDowell sought relief for herself and for similarly situated tenants who were allegedly owed allowances by the PHA. The plaintiff class was certified in May 1997.

To understand the plaintiffs' claims, some exposition of the Housing Act and its accompanying regulations is necessary. Under section 3(a)(1)(A) of the Act, as amended, a public housing authority ordinarily may not require a tenant family to pay more than 30% of its monthly adjusted income as rent. 42 U.S.C. § 1437a(a)(1)(A). Since the Department of Housing and Urban Development ("HUD") has interpreted "rent" to include the reasonable cost of utilities, see, e.g., Tenant Allowances for Utilities, 49 Fed.Reg. 31,399, 31,400 (Aug. 7, 1984); Wright v. Roanoke Redevelopment & Hous. Auth., 479 U.S. 418, 420, 107 S.Ct. 766, 93 L.Ed.2d 781 (1987), housing authorities must issue rebates to tenants who purchase service directly from a utility company. See West v. Sullivan, 973 F.2d 179, 182 (3d Cir.1992); West v. Bowen, 879 F.2d 1122, 1129 (3d Cir.1989).

These rebates take the form of monthly allowances credited toward the tenant's rent. See 24 C.F.R. § 965.504(b). The amount of the allowance is calculated "to approximate a reasonable consumption of utilities by an energy-conservative household of modest circumstances consistent with the requirements of a safe, sanitary, and healthful living environment." Id. § 965.505(a). Separate allowances are calculated for each utility based on the utility company's rates and a consumption factor that takes account of the climate in which the housing is located, the size of the dwelling units, and other relevant circumstances. Id. §§ 965.505(d), 965.507(a). If a tenant's utility bill exceeds the allowance, the tenant must make up the difference; if the allowance exceeds the bill, the difference may be pocketed. See West v. Bowen, 879 F.2d at 1129 & n. 8.

In January 1998, the parties agreed to settle McDowell's lawsuit. The stipulation of settlement read in pertinent part:

6. PHA shall, commencing with 1997, review, at least annually, the basis on which utility allowances have been established and, if reasonably required, shall establish revised allowances.

7. The annual review shall include all changes in circumstances indicating probability of a significant change in reasonable consumption requirements and changes in utility rates.

8. PHA may revise its allowances for resident-purchased utilities between annual reviews if there is a rate change except that PHA shall revise its allowances for resident-purchased utilities between annual [reviews] if any change in utility rates, by itself or together with prior rate changes not adjusted for, results in a change of 10 percent or more from the rates on which the allowances were based.

9. Adjustments to utility allowances shall be retroactive to the first day of the month following the month in which the last rate change taken into account in such revision became effective.

App. at 25. The terms of the settlement were incorporated into a consent decree, which provided that the District Court would retain continuing jurisdiction over the administration and enforcement of the parties' agreement. Id. at 29.

On December 1, 2000, after three years of stability in gas prices, the Philadelphia Gas Works ("PGW") raised the tenants' rates by approximately 11%. A month later, it raised them again. The PHA's own data show that the tenants' rates exceeded the baseline rate at the time the decree was entered by at least 10% during all but two months of the 25-month period from December 2000 through December 2002. Despite receiving several letters from the tenants' counsel urging it to revise the gas allowances, the PHA took no action on the rate hikes. The PHA frankly admits that it "fell out of compliance" with the decree during this period. PHA's Br. at 5.

On October 30, 2002, the tenants filed a motion to enforce the consent decree and to cite the PHA for civil contempt. Under a settlement reached in December 2002, the PHA agreed to increase the tenants' gas allowances effective January 1, 2003. The adjustment was not retroactive, however, and the parties' agreement expressly left unresolved whether the tenants were entitled to sanctions for the period of noncompliance from November 2000 through December 2002. The District Court fixed a briefing schedule to resolve this issue and heard oral argument on it in July 2003.

The Court denied the tenants' motion in an unpublished order dated March 9, 2004. It found that the tenants had "not suffered any actual provable injury as a result of any failure of PHA to comply with the Consent Decree prior to January 1, 2003." App. at 536. This finding was based on "[r]evised gas consumption calculations for the period July 1, 1999, through December 31, 2002," which showed that the overstatement of gas consumption during this period equaled or exceeded the shortfalls in the allowances due to the higher rates. Id. The revised calculations were provided by Sud Associates, P.A. ("Sud"), a consulting firm retained by the PHA.

The tenants moved for reconsideration under Federal Rule of Civil Procedure 59(e). In addition to challenging the District Court's construction of the consent decree, they argued that the Court should have afforded them discovery of Sud's data and an evidentiary hearing to contest its findings. The Court denied the motion on May 6, 2004, and the tenants timely appealed on June 4 of that year, raising the same claims rejected on their motion for reconsideration.

II.

The denial of a motion for reconsideration is reviewed for abuse of discretion. See N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1203 (3d Cir.1995). This standard of review also applies to the underlying decision to deny the motion to enforce the consent decree. See Holland v. N.J. Dep't of Corrs., 246 F.3d 267, 281 (3d Cir.2001); Harris v. City of Philadelphia, 47 F.3d 1342, 1349 (3d Cir.1995). An abuse of discretion may occur as a result of an errant conclusion of law, an improper application of law to fact, or a clearly erroneous finding of fact. Chiang v. Veneman, 385 F.3d 256, 264 (3d Cir.2004).

The proper construction of the consent decree is a question of law that receives plenary review. See Holland, 246 F.3d at 270; Sansom Comm. ex rel. Cook v. Lynn, 735 F.2d 1535, 1539 (3d Cir.1984). The decision to deny the tenants discovery and an evidentiary hearing is reviewed for abuse of discretion. See United States v. Hedaithy, 392 F.3d 580, 605 (3d Cir.2004); United States v. Albinson, 356 F.3d 278, 281 & n. 5 (3d Cir.2004). Under these standards, vacatur may be required if the District Court denied the tenants' motions based on a misconstruction of the decree or if it abused its discretion in denying them discovery and an evidentiary hearing. We discuss these claims in turn.

III.

Since a consent decree issued upon the stipulation of the parties has the characteristics of a contract, contract principles govern its construction. See Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 437, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004); United States v. New Jersey, 194 F.3d 426, 430 (3d Cir.1999). One of these principles is that an unambiguous agreement should be enforced according to its terms. See United States v. New Jersey, 194 F.3d at 430 (citing Fox v. U.S. Dep't of Hous. & Urban Dev., 680 F.2d 315, 319-20 (3d Cir.1982)). Whether the decree is unambiguous is a question...

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