Oti Kaga v. South Dakota Housing Dev. Authority, No. CIV 00-3009, 2002 DSD 1.

• Decision Date: 08 February 2002
• Docket Number: No. CIV 00-3009, 2002 DSD 1.
• Citation: 188 F.Supp.2d 1148
• Parties: OTI KAGA, INC., Plaintiff, v. SOUTH DAKOTA HOUSING DEVELOPMENT AUTHORITY, William Earley, Daryls Baum, John Rothstein, Kevin Culhane, Lynn Hager, Thomas Schramm and Leland Kleinsasser, Defendants.
• Court: U.S. District Court — District of South Dakota

Page 1148

188 F.Supp.2d 1148

OTI KAGA, INC., Plaintiff, v. SOUTH DAKOTA HOUSING DEVELOPMENT AUTHORITY, William Earley, Daryls Baum, John Rothstein, Kevin Culhane, Lynn Hager, Thomas Schramm and Leland Kleinsasser, Defendants.

No. CIV 00-3009, 2002 DSD 1.

United States District Court, D. South Dakota, Central Division.

February 8, 2002.

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James G. Abourezk, Abourezk Law Offices, PC, Sioux Falls, Mark S. Berry, Litteton, CO, for Plaintiff.

Michael L. Luce, Mark F. Marshall, Davenport, Evans, Hurwitz & Smith, Sioux Falls, SD, for Defendants.

MEMORANDUM DECISION AND ORDER

KORNMANN, District Judge.

[¶ 1.] Plaintiff Oti Kaga, Inc. ("Oti Kaga") instituted this action against the South Dakota Housing Development Authority ("SDHDA") and its seven individual members (collectively "the defendants") due to an ongoing dispute concerning various federal housing programs. The dispute is twofold with a unifying theme, Oti Kaga alleges, of racial discrimination against Native Americans. The first dispute, which began in 1996, concerns the allocation of low income housing tax credits. The second dispute, which began in 1998, focuses on the awarding of grants under the HOME Investment Partnership Act, 42 U.S.C. §§ 12741 et seq. Oti Kaga claims that the decisions made by the defendants in the housing programs were motivated by invidious discrimination. The defendants, pursuant to Fed.R.Civ.P. 56, filed a motion for summary judgment, Doc. 46, on various grounds. After careful consideration of the briefs, the documents on file herein, the submitted depositions and affidavits, and the applicable law, the court concludes, for the reasons set forth below, that there is no genuine issue of material fact and that the defendants are entitled to judgment as a matter of law.

[¶ 2.] Before proceeding further, the court must voice its displeasure with this case. Oti Kaga makes claims that are patently frivolous and seeks relief that is in total disregard of the United States Constitution. When these severe shortcomings, early on in this case, were brought to the attention of Oti Kaga's counsel in writing by the court, non-resident counsel responded quite disingenuously; instead of addressing the court's concerns, counsel chose to deflect and circumvent them. Counsel for Oti Kaga continue to advance claims that are frivolous and totally without legal merit.

BACKGROUND

A. The Parties

[¶ 3.] Oti Kaga, Inc. is incorporated under South Dakota law. It is a non-profit entity established by the Cheyenne River Sioux Tribal government, as authorized by the United States Housing Act of 1937, 42 U.S.C. §§ 1437 et seq. Oti Kaga was established to develop and construct low-income housing and to manage and operate low-income housing programs on the Cheyenne River Sioux Reservation.

[¶ 4.] Beyond the above description, Oti Kaga fails to describe its membership and its relation, if any, with the government of the Cheyenne River Sioux Tribe. It does appear, however, that the members of Oti Kaga are all Native Americans from the Cheyenne River Sioux Tribe. This has some significance because of the relief Oti Kaga seeks in this action. Oti Kaga, as a corporation, is the sole plaintiff in this action. The Cheyenne River Sioux Tribe is not a plaintiff. No individual Native Americans, from the Cheyenne River Sioux Tribe or elsewhere, are plaintiffs. Oti Kaga, as a corporation, stands alone.

[¶ 5.] SDHDA is "an independent public instrumentality" that exercises "essential public functions." SDCL 11-11-10. SDHDA has various responsibilities, one of which is to adopt a "tax credit allocation plan" pursuant to § 42 of the Internal Revenue Code, and to receive, rank, and award federal low income housing tax credits. In addition, SDHDA is responsible for the administration of the HOME Incentive Partnership Program in South Dakota. For purposes of these programs, SDHDA is an "agency of the state." SDCL 11-11-47.

[¶ 6.] Defendants William Earley, John Rothstein, Kevin Culhane, Lynn Hager, Thomas Schramm and Leland Kleinsasser are members of the SDHDA Board of Commissioners. They have been sued in their individual and official capacities. Defendant Darlys Baum is the Executive Director of SDHDA and Secretary of the SDHDA Board of Commissioners. She is likewise sued in her individual and official capacities.

[¶ 7.] Before delving into the factual background of this dispute, the court will detail the two federal housing programs at issue in this case.

B. Tax Credit Allocation Program

[¶ 8.] The tax credit allocation program, as noted above, is authorized by Internal Revenue Code § 42. That section authorizes state housing credit agencies, like SDHDA, to allocate tax credits for the construction of low-income housing. In essence, the tax credits act as "carrots" to encourage various entities to construct low-income housing. Internal Revenue Code § 42(m) requires that all tax credits be allocated pursuant to a "qualified allocation plan," which must be adopted by the housing credit agency and which must be approved by the governmental unit of which such agency is a part. IRC § 42(m)(1)(A)(i).

[¶ 9.] In deciding which projects should receive tax credits, § 42(m) sets forth certain criteria which must be considered, including

(i) project location,

(ii) housing needs characteristics,

(iii) project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan,

(iv) sponsor characteristics,

(v) tenant populations with special housing needs,

(vi) public housing waiting lists,

(vii) tenant populations of individuals with children, and

(viii) projects intended for eventual tenant ownership.

IRC § 42(m)(1)(C)(i-viii).

[¶ 10.] In evaluating the above criteria, the housing credit agency is to consider

(i) the sources and uses of funds and the total financing planned for the project,

(ii) any proceeds or receipts expected to be generated by reason of tax benefits,

(iii) the percentage of the housing credit dollar amount used for project costs other than the cost of intermediaries, and

(iv) the reasonableness of the developmental and operational costs of the project.

IRC § 42(m)(2)(B)(i-iv). As noted above, SDCL 11-11-47 expressly denominates SDHDA as the housing credit agency for South Dakota.

C. HOME Program

[¶ 11.] The second federal housing program involved in this action is the HOME Investment Partnership Act ("HOME"), which is Title II of the Cranston-Gonzalez National Affordable Housing Act, codified at 42 U.S.C. §§ 12701 et seq. HOME funnels federal funds directly to participating jurisdictions. The jurisdictions then disburse the funds in the form of loans and grants "to provide incentives to develop and support affordable rental housing and home ownership affordability." 42 U.S.C. § 12742(a)(1). Prior to 1998, Indian tribes were participating jurisdictions in HOME. See 42 U.S.C. § 12747(a)(2) (1996). In fact, HOME created a HOME set-aside for Indian tribes which allocated to them 1% of the total allocated HOME funds. See id. In addition to the set-aside, Indian tribes could also compete for HOME funds with other entities for money allocated to the states for distribution.

[¶ 12.] While the Indian set-aside still existed, the Department of Housing and Urban Development ("HUD"), the governmental agency that oversees the implementation of HOME, published detailed regulations. See 24 C.F.R. Part 92. At issue in this case is 24 C.F.R. § 92.201(b)(5), which states that "[a] State may fund projects on Indian reservations located within the State provided that the State includes Indian reservations in its consolidated plan." The consolidated plan is the document that is submitted to HUD which serves as the planning document of the jurisdiction and as an application for federal funding under HOME. See 24 C.F.R. § 91.5.

[¶ 13.] The regulation giving the states the discretion to fund projects located on Indian reservations worked in a rather uncontroversial manner in the pre-1998 context. As HOME existed prior to 1998, Indian tribes received their own HOME funds via the Indian set-aside. Given that set-aside, it made sense that the states were afforded the option of funding projects on Indian reservations, provided, of course, that the Indian projects were included in the state's consolidated plan.

[¶ 14.] In 1996, Congress passed the Native American Housing Assistance and Self-Determination Act ("NAHASDA"), 25 U.S.C. §§ 4101 et. seq., which became effective October 31, 1997. NAHASDA dramatically changed HOME as it applied to Indian tribes. Specifically, NAHASDA repealed the Indian set-aside in HOME. See 42 U.S.C. § 12747. In repealing the HOME Indian set-aside and those like it in other federal housing programs, Congress intended to block-grant the money directly to Indian tribes so they would not have to come through the bureaucratic wranglings of Washington nor wait for money from state governments. See 142 Cong. Rec. H11603 (daily ed. Sept. 28, 1996) (remarks of Congressman Hayworth). In essence, with NAHASDA, Congress gave Indian tribes the right to decide how to best spend their federal housing dollars. See id.

[¶ 15.] Although the Indian set-aside in HOME was repealed, the HUD regulation giving states the discretion of whether to use state HOME funds on Indian projects remained unaltered. Thus, 24 C.F.R. § 92.201(b)(5) is still on the books. Its continued existence has spawned its own controversy, which this litigation exemplifies. In addition, the passage of NAHASDA has raised the question whether Indian tribes can participate in HOME for funds that are allocated to the states. Obviously Oti Kaga believes it can. Moreover, although it is rather unclear, there appears to be nothing that expressly precludes their involvement. As one commentator has noted, "[e]lgibility for American Indian tribes to participate in another housing...