Rowan Court Subdivision 2013 Ltd. v. Coporation

Decision Date12 September 2017
Docket NumberCIVIL ACTION NO. 15-870-JWD-RLB
CourtU.S. District Court — Middle District of Louisiana

This matter is before the Court on the Federal Defendants' Motion to Dismiss Amended Complaint, (Doc. 59), filed by the United States Department of Housing and Urban Development ("HUD") and the United States Department of the Treasury ("the Treasury") (collectively, the "Federal Defendants"). Plaintiffs Rowan Court Subdivision 2013 Limited Partnership ("Rowan") and John Does 1-60 (the "John Doe Plaintiffs") (collectively, the "Plaintiffs") oppose the motion. (Doc. 67). The Federal Defendants have also filed a reply in further support of their motion. (Doc. 73). Oral argument is not necessary.

Having carefully considered the law, allegations of Plaintiffs' Amended Complaint, and arguments of the parties, the Federal Defendants' motion is granted, and Plaintiffs' claims against the Federal Defendants are dismissed.

I. Relevant Factual Background
A. Overview and Procedural History

Plaintiffs bring this suit for relief related to the award of low-income housing tax credits and other federal funding available under 26 U.S.C. § 42. Plaintiffs assert claims under (1) the Due Process and Equal Protection clauses of the Fourteenth Amendment; (2) the Due Process clause of the Fifth Amendment; (3) Article 2, Section 1 of the Louisiana Constitution; and (4) Louisiana Civil Code articles 1967, 2315, and 2316. (Doc. 55 at 1). Plaintiffs claim that various defendants improperly evaluated Rowan's application for tax credits and federal funding related to the development of a housing subdivision and improperly awarded tax credits and funds to two other projects. The John Doe Plaintiffs are alleged to be individuals in Ouachita Parish who were adversely affected by these actions, specifically:

- John Does 1-34 are "the Ouachita Parish people who would have benefitted from affordable housing being provided" (Id. at 2);
- John Does 35-40 are "the Ouachita Parish contractors who would have worked on the construction jobs" (Id. at 3);
- John Does 41-50 are "the Ouachita Parish local businesses and their owners that did not receive the increase in business from the construction of the affordable housing" (Id.); and
- John Does 51-60 are "the Ouachita Parish citizens who lost the benefit of the increase in sales and property tax revenue the construction of affordable housing would have created." (Id.)

Plaintiffs allege that the Federal Defendants oversee and provide funds for the program at issue in this action.1

Plaintiffs' claims were first raised in a Complaint filed in December 2015. (Doc. 1). The Federal Defendants moved to dismiss the Complaint, arguing that Plaintiffs lacked Article III standing, Plaintiffs had not established a valid waiver of sovereign immunity, and Plaintiffs' allegations were conclusory and failed to state a claim on which relief could be granted. (Doc. 21).

On August 11, 2016, the Court granted the Federal Defendants' motion to dismiss, ruling that Plaintiffs had failed to demonstrate that the Federal Defendants waived sovereign immunity and had failed to state a claim on which relief could be granted. (Doc. 48 at 9). The Court did not reach the Federal Defendants' arguments concerning standing. (Id.) The Court granted Plaintiffs leave to amend but "strongly caution[ed]" Plaintiffs regarding their obligations under Federal Rule of Civil Procedure ("Rule") 11. (Id.). Specifically, the Court opined that original Complaint's allegations "came close to" being impermissible under Rule 11, which states that an attorney filing a complaint certifies that the complaint's claims are warranted by existing law or a nonfrivolous argument to extend, modify, or reverse existing law or create new law. (See id. at 9, 22).

The operative Amended Complaint was filed in September 2016.2 (Doc. 55).

B. The Low Income Housing Tax Credit Program

In Rowan Court Subdivision 2013 Limited Partnership v. Louisiana Housing Agency, 2015-1212 (La. App. 1 Cir. 2/24/16); 2016 WL 759121, writ denied, 2016-0591 (La. 5/20/16), 191 So. 3d 1067, the Louisiana First Circuit Court of Appeal provided an overview of the low income housing tax credit program at issue in this case. As the First Circuit explained:

The LHC was established pursuant to La. R.S. 40:600.86, et seq. One of the responsibilities of the LHC is to administer Louisiana's portion of the federal Low Income Housing Tax Credit Program, enacted under 26 U.S.C.A. § 42 (the Internal Revenue Code), which promotes the development of affordable and workforce housing by allocating tax credits to developers of affordable housing. The tax credits are awarded to affordable housing developers in accordance with a detailed application process and criteria set forth in a Qualified [Allocation] Plan ("QAP"), which is developed each year after a public hearing. After the affordable housing developers submit a proposed project based on the QAP, the LHC scores the developers' projects and ranks the developers/projects according to their scores. The QAP provides a challenge process through which developers are allowed tochallenge the initial allocation of points, and the developers may appeal and have a panel review the LHC decision. Thereafter, the scores are finalized, projects are ranked, and top ranking projects are awarded tax credits by the LHC Board of Commissioners ("Board"). Tax credits that are either not awarded or are subsequently retracted (because of a developer's failure to comply with the QAP) are re-allocated to other developers until the QAP for the next year is approved, in which case the tax credits are rolled over to the next QAP.

Id., 2016 WL 759121 at *1.

C. The Amended Complaint's Allegations

Plaintiffs allege that, in 2013, LHC issued a request for proposals to developers to participate in a "competitive 2014 Housing Tax Credit Round, pursuant to HUD and Treasury regulations and consent." (Doc. 55 at 5). LHC developed and implemented "selection criteria" to be used to score all applications in order to rate them pursuant to a QAP. (Id.)

Rowan submitted a proposal seeking tax credits and other funds for its subdivision, and the proposal received a score of 122. (Id.) Rowan objected to the score as "incorrect under the selection criteria used to allocate points to its application" and submitted a "10-Day Challenge Letter," which Plaintiffs maintain was in compliance with the protest procedure outlined in the QAP. (Id. at 6). In November 2013, Rowan was notified that LHC "refused to allocate the additional points that [Rowan] was entitled to[.]" (Id.) Rowan has filed this lawsuit to challenge LHC's "improper denial of the full point value of [Rowan's] application." (Id.) Plaintiffs also challenge LHC's reservation of tax credits for two projects that were allegedly based on incorrect and falsified applications. (Id.). Specifically, Plaintiffs claim that applications for tax credits related to "Sycamore Point" and "Trinity Estates" projects certified that these projects were located in the City of Richwood but were actually located outside of Richwood. (Id. at 7).

With respect to the Federal Defendants, Plaintiffs allege that HUD "failed to enforce its own regulations, which require LHC to reserve tax credits based on the strict point system contained in the HUD[-]approved QAP," which in turn caused Rowan to be denied tax credits itwas entitled to. (Id. at 8). Plaintiffs purport to seek "an extension of the existing law" that would permit a private citizen to bring suit in federal court to challenge the action or inaction of a federal agency "when its employees have failed to do the jobs for which they were hired." (Id.). Plaintiffs further allege that applying "requires the applicant [to] agree to abide by the numerous federal statutes enumerated in this application," that federal funds are "in the possession of HUD and awarded by HUD," and that federal tax credits are awarded by HUD after review of an application. (Id. at 9). Plaintiffs contend that "employees and officers of HUD were negligent in their decision to award . . . funds to the Trinity [Estates] and Sycamore Point Projects, as they were falsely represented to be in the Town of Richwood, when they were not." (Id.) Finally, Plaintiffs allege upon information and belief that HUD and the Treasury were negligent and failed to "oversee" that program requirements were followed and federal statutes were complied with in the Trinity Estates and Sycamore Point applications. (Id.)

Plaintiffs claim to seek no damages from the Federal Defendants, but request "a declaratory judgment that the employees of the aforementioned agencies have breached the duty owed to [Plaintiffs] cited hereinafter." (Id. at 4-5). According to the body of the Amended Complaint, the declaratory judgment sought would also state that "LHC's actions in denying [Rowan's] full due point value and reserving tax credits for the Trinity Estates and Sycamore Point projects was in violation of the QAP rules approved by HUD, and illegal under Louisiana Civil Code Article 7." (Id. at 7-8).

Plaintiffs' prayer for relief asks the Court to "declare" that: (1) the credits reserved for the Trinity Estates and Sycamore Point projects violate unspecified QAP "rules;" (2) Rowan is located in Ouachita Parish; (3) the awards to the Trinity Estates and Sycamore Point projects are "absolute nullities and void ab initio" under Louisiana law; and (4) HUD and certain State Defendants "haveviolated the civil rights of [Plaintiffs] by engaging in actions that violated due process and equal protection under the law." (Id. at 11-12). Plaintiffs further request that the Trinity Estates and Sycamore Point tax credits be reallocated to "other qualifying projects," or, in the alternative, that Rowan receive damages in the amount of the tax credits that would...

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