Schs Associates v. Cuomo, No. 97-368L.
| Citation | 139 F.Supp.2d 238 |
| Decision Date | 12 April 2001 |
| Docket Number | No. 97-368L.,No. 98-193L. |
| Parties | SCHS ASSOCIATES, a Rhode Island Limited Partnership, Plaintiff, v. Andrew CUOMO, as Secretary of the United States Department of Housing and Urban Development, The United States Department of Housing and Urban Development, Steven O'Rourke, as Executive Director of the Providence Housing Authority, and the Providence Housing Authority, Defendants, SCHS Associates, a Rhode Island Limited Partnership and Gatsby Housing Associates, Inc., Plaintiffs, v. Andrew Cuomo, as Secretary of the United States Department of Housing and Urban Development and the United States Department of Housing and Urban Development, Defendants. |
| Court | U.S. District Court — District of Rhode Island |
Alden C. Harrington, Boyajian, Harrington & Richardson, Providence, RI, John M. Bradham, Richard M. Price, Nixon Peabody LLP, Washington, DC, for Plaintiffs.
Michael P. Iannotti, Anthony C. DiGioia, Assistant U.S. Attorneys, Providence, RI, Stephen J. Reid, Jr., Staci L. Sawyer, Blish & Cavanagh, Providence, RI, Mark C. Ouellet, Cranston, RI, for Defendants.
DECISION AND ORDER
The matters before the Court are C.A. No. 97-368L ("the 1997 lawsuit") and C.A. No. 98-193L ("the 1998 lawsuit"). The 1997 lawsuit is before the Court on cross motions for summary judgment, while the 1998 lawsuit is before the Court on defendants' motion to dismiss for failure to state a claim. These matters have not been formally consolidated; however, they both relate to a reduction in contract rents for the Barbara Jordan I Apartments ("BJI"), a scattered-site Section 8 housing development located in Providence, Rhode Island. The Court's opinion will address each matter in turn, starting with the cross motions for summary judgment.
Plaintiff SCHS Associates ("SCHS") is the owner and operator of BJI. Plaintiff moves for partial summary judgment on Count One and Count Two of its First Amended Complaint pursuant to Federal Rule of Civil Procedure 56(d).1 In Count One, SCHS alleges that defendants Andrew Cuomo, as Secretary of the United States Department of Housing and Urban Development, and the United States Department of Housing and Urban Development (collectively, "the HUD defendants") violated the Administrative Procedure Act, 5 U.S.C. § 701 et seq. by unilaterally reducing the contract rents for BJI in violation of Section 142(d) of the Housing and Community Development Act of 1987, 42 U.S.C. § 1437f(c)(2)(C)(1994). In Count II, SCHS requests a declaratory judgment to the effect that a unilateral reduction in contract rents violates 42 U.S.C. § 1437f(c)(2)(C). The HUD defendants move for summary judgment pursuant to Federal Rule of Civil Procedure 56(c). For the reasons set forth below, the Court denies plaintiff's motion for partial summary judgment. The Court also denies the HUD defendants' motion for summary judgment.
In the 1998 lawsuit, SCHS and Gatsby Housing Associates, Inc. ("Gatsby"), the property manager for BJI, seek a declaratory judgment that attorneys' fees incurred in the 1997 lawsuit are appropriate project expenses that may be paid from BJI's contract rents. Pursuant to Federal Rule of Civil Procedure 12(b)(6), the HUD defendants move to dismiss plaintiffs' complaint for failure to state a claim under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202 (1994). For the reasons that follow, this Court grants defendants' motion to dismiss.
The following facts are not in dispute unless otherwise noted. SCHS acquired BJI, a 193 unit multifamily development located in Providence, Rhode Island, in 1983. BJI is comprised of a series of one-, two-, and three-unit homes scattered throughout a one-mile area. The housing development is insured by HUD under the National Housing Act, 12 U.S.C. § 1715l (d)(4) (1994), and is subsidized through the "Substantial Rehabilitation" program administered under Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f ("Section 8").
Section 8 was enacted for the purpose of aiding low-income families in obtaining decent, safe and affordable housing, and to promote economically mixed housing. Under the Substantial Rehabilitation program, the owner of an assisted unit receives subsidies in the form of housing assistance payments. Housing assistance payments are the difference between the contract rent, which is the total amount of rent payable for each unit, and the tenant rent, which is the amount payable by the tenant. See 42 U.S.C. § 1437a(a) (1994); 24 C.F.R. § 881.201 (2000)("Contract rent" and "Tenant rent" defined).
SCHS receives its housing assistance payments from HUD via the Providence Housing Authority ("PHA"). HUD and the PHA entered into an Annual Contributions Contract, wherein HUD promised to provide the PHA with the necessary funds to make housing assistance payments to SCHS and the PHA agreed to serve as the contract administrator for BJI. SCHS and the PHA entered into a Housing Assistance Payments Contract ("HAP Contract"), which became effective on July 1, 1984. HUD executed the HAP Contract as an approving party. Under the HAP Contract, the PHA agreed to provide rental subsidies in return for SCHS's promise to provide "decent, safe and sanitary" housing to eligible families. In addition, HUD and SCHS entered into a Regulatory Agreement which provides that the approved rent for each Section 8 unit shall be adjusted in accordance with the HAP Contract.
The HAP Contract designates BJI as a Substantial Rehabilitation project subject to 24 C.F.R. Part 881. The HAP Contract also establishes the maximum amount of the housing assistance payments and provides that contract rents may be adjusted annually. This provision, entitled "Rent Adjustments," provides in pertinent part:
(a) Funding of Adjustments. Housing assistance payments will be made in amounts commensurate with Contract Rent adjustments under this section up to the maximum amount authorized under section 2.3(a) of this Contract.
(b) Annual Adjustments.
(1) Upon request from the Owner to the [contract administrator], Contract Rents will be adjusted on the anniversary date of the Contract in accordance with 24 C.F.R. 888 and this Contract. See, however, paragraph (d).
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(3) Contract Rents may be adjusted upward or downward, as may be appropriate; however, in no case shall the annual adjustment result in Contract Rents less than the Contract Rents on the effective date of the Contract.
(c) Special Additional Adjustments. Special additional adjustments shall be granted, when approved by HUD, to reflect increases in the actual and necessary expenses of owning and maintaining the Contract Units which have resulted from substantial general increases in real property taxes, utility rates, assessments, and utilities not covered by regulated rates. The Owner must demonstrate that such general increases have caused increases in the Owner's operating costs which are not adequately compensated for by annual adjustments. The Owner shall submit to HUD supporting data, financial statements and certifications which clearly support the increase. See, however, paragraph (d).
(d) Overall Limitation. Notwithstanding any other provision of this Contract, adjustments after Contract execution or cost certification, where applicable, shall not result in material differences between the rents charged for assisted and comparable unassisted units, as determined by HUD; except to the extent that the differences existed with respect to the Contract Rents set at Contract execution or cost certification, where applicable.
Originally, the contract rents for BJI were adjusted each year through application of the annual adjustment factor ("AAF") pursuant to HUD regulations at 24 C.F.R. Part 888 and 24 C.F.R § 881.609 (1980). The regulations were later revised to incorporate by reference, at 24 C.F.R. § 881.609, the regulations at 24 C.F.R. § 880.609 (2000), which contain the same requirements as originally stated in 24 C.F.R. § 881.609. 24 C.F.R. § 880.609 provides:
Adjustment of contract rents.
Upon request from the owner to the contract administrator, contract rents will be adjusted on the anniversary date of the contract in accordance with 24 CFR part 888.
For all projects, special additional adjustments will be granted, to the extent determined necessary by HUD ... to reflect increases in the actual and necessary expenses of owning and maintaining the assisted units which have resulted from substantial general increases in real property taxes, assessments, utility rates, and utilities not covered by regulated rates, and which are not adequately compensated for by annual adjustments under paragraph (a) of this section. The owner must submit to the contract administrator required supporting data, financial statements and certifications.
Any adjustments of contract rents for a unit after Contract execution or cost certification, where applicable, must not result in material differences between the rents charged for assisted units and comparable unassisted units except to the extent that the differences existed with respect to the contract rents set at Contract execution or cost certification, where applicable.
On December 23, 1994, Luisa G. Osborne, the Director of the Multifamily Division at the Rhode Island State Office of HUD ("RISO"), sent a memorandum to Helen Dunlap, Deputy Assistant Secretary for Multifamily Housing Programs at HUD Headquarters in Washington, D.C., requesting approval to convert the method of adjusting contract rents for BJI from the AAF method to a budget-based method. Among the reasons stated in Ms. Osborne's memorandum for the need to convert to the budget-based approach was that ...
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Villalobos v. North Carolina Growers Ass'n Inc., No. CIV.97-1589(JAG).
...for partial summary judgment is identical to that for summary judgment under Federal Rule of Civil Procedure 56(c). SCHS Assoc. v. Cuomo, 139 F.Supp.2d 238, 244 (D.R.I.2001). For the purposes of summary judgment, the moving party always has the initial burden of showing the absence of a gen......