Rodriguez v. Carson

Decision Date14 August 2019
Docket Number17-CV-4344 (JMF)
Citation401 F.Supp.3d 465
Parties Robert RODRIGUEZ, et al., Plaintiffs, v. Ben CARSON, in his official capacity as Secretary of Housing and Urban Development, et al., Defendants.
CourtU.S. District Court — Southern District of New York

Cristina Maria Quinones-Betancourt, Willkie Farr & Gallagher, Cassandra Charles, Kevin Michael Cremin, Shi-Shi Wang, Mobilization For Justice, Roopal Patel, Manhattan Legal Services, New York, NY, Edward Joseph Josephson, South Brooklyn Legal Services, Brooklyn, NY, for Plaintiffs.

Casey Kyung-Se Lee, United States Attorney's Office, New York, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

In County of Suffolk v. Sebelius , 605 F.3d 135 (2d Cir. 2010), the Second Circuit held that the Constitution's Appropriations Clause limits the relief available in an equitable action for reimbursement of funds from the federal Treasury. In particular, the Court held that a plaintiff is limited to reimbursement from the specific appropriation that authorized the original expenditure and may not recover when the original appropriation has been "lawfully distributed — and therefore exhausted." Id. at 138. The question presented here, one of first impression, is whether that holding extends to claims for reimbursement directed at appropriated funds that have been contractually obligated to third parties, but not yet disbursed. For the reasons that follow, the Court holds that County of Suffolk does not extend that far. Accordingly, and because Defendants' reliance on County of Suffolk was their sole ground for resisting an injunction in this case, the Court orders Defendants to reimburse Plaintiffs out of existing appropriated funds notwithstanding the fact that they have already been contractually obligated.

BACKGROUND

The Court presumes substantial familiarity with the background of this case, which is set forth in more detail in its Opinion and Order entered March 29, 2019. Rodriguez v. Carson , 377 F. Supp. 3d 401 (S.D.N.Y. 2019) (" Rodriguez I "). Put briefly, tenants who receive housing assistance pursuant to Section 8 of the United States Housing Act of 1937 ("Housing Act"), brought this suit arguing that Defendant United States Department of Housing and Urban Development's ("HUD") interpretation of one provision of that Act had been requiring them to pay more in rent than the statute prescribed. The Court agreed, and granted two PlaintiffsRobert Rodriguez and Jovanny Pichardo ("Plaintiffs") — a declaratory judgment to that effect. See Rodriguez I , 377 F. Supp. 3d at 412. On remand, HUD revised the relevant formula, but applied the new formula only prospectively — meaning, at least as to Plaintiffs, that no reimbursements for overpayments prior to July 1, 2019, would be forthcoming. See ECF No. 108 ; ECF No. 119, at 8 n.3. Plaintiffs then sought injunctive relief directing HUD to reimburse them for those past overpayments. See ECF No. 113. (As discussed below, conventional damages are unavailable because the case was brought under the Administrative Procedure Act, which waives the United States' sovereign immunity only as to actions against federal agencies and officers "seeking relief other than money damages." 5 U.S.C. § 702.)

Significantly, Defendants' "sole basis for opposing the requested relief" was that the Second Circuit's decision in County of Suffolk forbade it. Rodriguez v. Carson ("Rodriguez II "), No. 17-CV-4344 (JMF), 2019 WL 3296961, at *1 (S.D.N.Y. July 22, 2019) ; see ECF No. 119. In a Memorandum Opinion and Order entered on July 22, 2019, the Court agreed with Defendants as to most, but not all, of the disputed funds, holding that County of Suffolk foreclosed relief with respect to any overpayments made in Fiscal Years 2011-2018 because HUD had exhausted the relevant appropriations. See Rodriguez II , 2019 WL 3296961, at *2. Because it was not clear that the same was true of all funds relating to Fiscal Year 2019, however, the Court reserved decision on Plaintiffs' remaining claims. Id. at *2-3. The record, now supplemented by the parties with additional undisputed facts, indicates that HUD has disbursed approximately $11.8 billion of the relevant $20 billion appropriation for Fiscal Year 2019. Compare ECF No. 120 ("Fontanez Decl.") ¶ 7, with ECF No. 125 ("Durham Decl.") ¶ 3. The remaining funds have been obligated, but not yet disbursed. See Durham Decl. ¶ 3.

DISCUSSION

The Administrative Procedure Act ("APA") waives the United States' sovereign immunity as to actions against federal agencies and officers "seeking relief other than money damages." 5 U.S.C. § 702. As the Supreme Court has explained, however, "[t]he fact that a judicial remedy may require one party to pay money to another is not a sufficient reason to characterize the relief as money damages." Bowen v. Massachusetts , 487 U.S. 879, 893, 108 S.Ct. 2722, 101 L.Ed.2d 749 (1988) (internal quotation marks omitted). Instead, because the APA authorizes suits against the United States for "the recovery of specific property or monies ," id. at 893, 108 S.Ct. 2722 (emphasis added), a plaintiff can recover money pursuant to the APA if that money is "the very thing to which he was entitled," id. at 895, 108 S.Ct. 2722 (internal quotation marks omitted). Thus, for example, the APA waives sovereign immunity as to a plaintiff's claim for reimbursement of "funds to which a statute allegedly entitles it," but not as to the same plaintiff's claim for "money in compensation for the losses, whatever they may be, that [it] will suffer or has suffered by virtue of the withholding of those funds." Id. at 901, 108 S.Ct. 2722 (internal quotation marks omitted).

In County of Suffolk , the Second Circuit applied these principles in the context of a lawsuit that, like this one, sought an injunction directing reimbursement of funds to which the plaintiff claimed a statutory entitlement. The Second Circuit explained, first, that Section 702 "only functions as an effective waiver of the government's sovereign immunity to the extent that plaintiffs seek to force [the government] to return property" — that is, a specific res. County of Suffolk , 605 F.3d at 140-41. Noting that the Appropriations Clause provides that "[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law," U.S. Const. art. I, § 9, cl. 7, meaning that "no money can be paid out of the Treasury unless it has been appropriated by an act of Congress," the Second Circuit held that, "in cases challenging an agency's expenditure of funds, the res at issue is identified by reference to the congressional appropriation that authorized the agency's challenged expenditure." County of Suffolk , 605 F.3d at 141 (internal quotation marks omitted). "To seek funds from another source," the court explained, "is to seek compensation rather than the specific property the plaintiff aims to recover," and would therefore "fall[ ] outside the scope" of Section 702's waiver of sovereign immunity. Id. Therefore, in an APA action "[w]here ... the congressional appropriations relating to the funds sought by private litigants have been lawfully distributed — and therefore exhausted — by a federal agency, courts lack authority to grant effectual relief in the context of an Article III case or controversy." Id. at 138.

Applying County of Suffolk to the undisputed facts of this case, the Court previously held that Plaintiffs could not obtain reimbursement for their overpayments in Fiscal Years 2011-2018 because the relevant appropriations for those years have been exhausted. Rodriguez II , 2019 WL 3296961, at *2. The Court noted, however, that the rule of County of Suffolk may not extend (as the D.C. Circuit's similar rule appears to extend) to appropriated funds that the agency has obligated , but not yet disbursed. See Rodriguez II , 2019 WL 3296961, at *2 (citing City of Houston v. Dep't of Hous. & Urban Dev. , 24 F.3d 1421, 1426-27 (D.C. Cir. 1994) ).1 That question is now squarely presented because it is undisputed that the appropriated funds from which Plaintiffs could be reimbursed for their Fiscal Year 2019 overpayments have been fully obligated, but not yet fully disbursed. Defendants contend that County of Suffolk precludes relief not only from disbursed funds, but also from obligated funds. See ECF No. 124 ("Defs.' Suppl. Mem."), at 2-4. In the alternative, they contend that, given the principles underlying the Second Circuit's decision, the distinction between obligated and disbursed funds should make no difference to the analysis. See id. The Court disagrees on both scores.

First, County of Suffolk does not, by its terms, extend to funds that have been obligated but not yet disbursed. Defendants argue that the County of Suffolk court recognized and adopted "two independent grounds" upon which City of Houston 's holding rested, Defs.' Suppl. Mem. 3 (quoting County of Suffolk , 605 F.3d at 142 ), "one of which was that HUD had contractually obligated the applicable ‘appropriation from Congress,’ " id. (quoting City of Houston , 24 F.3d at 1427 ). But a quick glance at County of Suffolk debunks that claim. Of course, City of Houston recognized that the funds at issue there had been contractually obligated (hence this Court's order directing supplemental briefing on this question). But the "two independent grounds" that the County of Suffolk court recognized were that before the plaintiff had brought suit in City of Houston , "two events [had] occurred: (1) HUD awarded the funds at issue to other grant recipients, thereby exhausting the relevant FY 1986 appropriation; and (2) the FY 1986 appropriation authorizing the grants expired and therefore lapsed." County of Suffolk , 605 F.3d at 141. The Second Circuit explained that these two events precluded relief "because the Appropriations Clause prevents additional funds from being paid out of the Treasury. " Id. at 142 (emphasis added). Neither...

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